The Australian Dollar gained against the US Dollar after the People’s Bank of China held its Loan Prime Rates steady at 3.00% for one-year and 3.50% for five-year terms. Traders are looking forward to the Reserve Bank of Australia’s Meeting Minutes for clues on inflation and possible rate changes. At the same time, the US Dollar Index dropped to about 98.60, ending a three-day winning streak. The US is waiting for the third-quarter GDP data, while the Federal Reserve Bank of Cleveland mentioned they are taking a break to evaluate the effects of previous rate cuts. The US Consumer Price Index fell to 2.7%, lower than the expected 3.1%.

Technical Overview for AUD/USD

The AUD/USD pair is currently just below 0.6620, with neutral-to-bullish conditions shown by a 14-day RSI of 57.05. If it breaks above 0.6620, momentum may increase toward highs of 0.6685. On the flip side, a drop below this level could see it fall near 0.6414. The Reserve Bank of Australia influences the value of the Australian Dollar through interest rates that are affected by inflation and economic data. Quantitative easing often weakens the AUD, while quantitative tightening strengthens it. Given the differences between central banks, traders should concentrate on the growing policy gap between the Reserve Bank of Australia and the US Federal Reserve in the upcoming weeks. The RBA is facing stubborn inflation, with Australia’s latest Q3 2025 CPI indicating inflation is still high at 3.9%, well over the target area. This contrasts sharply with the US, where November’s CPI dropped to 2.7%, allowing the Fed to hold steady. The key event will be tomorrow’s RBA meeting minutes, which could significantly impact the Aussie dollar. Traders ought to brace for volatility, as any signs of a hawkish stance could quickly raise the 27% chance for a February 2026 rate hike. This uncertainty makes short-term options like weekly straddles on the AUD/USD an intriguing way to trade potential price swings without guessing the direction.

Impact of Central Bank Policies

On the US side, the dollar’s drop seems justified since the Fed is clearly in a wait-and-see stance. The recent low November retail sales growth of just 0.1% further supports the idea that the Fed will pause policy changes. With markets predicting a 79% chance of no adjustment at the January meeting, any strength in the US dollar is likely to be brief and seen as a selling opportunity. We should also monitor China, as the PBoC’s decision to hold rates steady provides essential support for the Australian dollar. This stability is crucial for Australian commodity exports, which have benefitted from a slight recovery in recent Chinese industrial production numbers. A healthy Chinese economy acts as a buffer for the Aussie, even if the RBA takes a less aggressive approach. Currently, the AUD/USD is poised for a move, lingering around the 0.6620 level. Call options with strike prices above the 0.6685 three-month high could be a solid choice if the RBA minutes indicate a strong fight against inflation. Conversely, if the pair dips below the current upward trend, put options targeting the 0.6414 six-month low would offer protection against a downturn. We should keep in mind the lessons from the high-inflation periods of 2022 and 2023, where central bank policies shifted rapidly. Back then, central banks moved closely together to tighten policies, but now we are entering a period of significant differences. This divergence among national economies will likely drive forex markets through the first quarter of 2026. Create your live VT Markets account and start trading now.

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