The Australian Dollar (AUD) is likely to trade between 0.6685 and 0.6730 due to increased upward momentum. However, longer-term forecasts indicate that the AUD may trade within the range of 0.6640 to 0.6730. In the past 24 hours, the AUD had the potential to dip to 0.6670 but instead jumped to 0.6719. While there is some upward momentum, it isn’t strong enough for a significant increase, pointing to a trading range of 0.6685 to 0.6730.

1-3 Weeks Trading Outlook

Looking at the next 1-3 weeks, the AUD reached a 14-month high of 0.6727 but is having trouble holding onto those gains. Even with some recent upward momentum, it won’t likely lead to a continued rise. Instead, a range of 0.6640 to 0.6730 is expected. Reflecting on our analysis from last January, we noted that upward momentum was slowing, predicting the Australian dollar would trade within a range. This forecast turned out to be accurate, as the currency pair stayed mostly within that range for the following quarter. We’re seeing a similar situation now, where momentum is faltering after a brief increase. As of January 6, 2026, the AUD/USD appears to be range-bound again, likely staying between 0.6800 and 0.6950 for the next few weeks. Both the Reserve Bank of Australia and the US Federal Reserve seem to be holding steady, which is limiting significant moves in the currency pair. This alignment in policy is preventing major breakouts.

Derivative Trading Strategy

Derivative traders should be aware that one-month implied volatility has dropped to near 12-month lows, currently at 7.8%. This indicates that options are relatively cheap. However, a potentially more effective strategy may be to sell this low volatility, as the market isn’t expecting big, unexpected changes in the near future. Thus, strategies that capitalize on time decay and a stable price range could be appealing. Consider selling premium through short strangles or iron condors, using strike prices outside the expected 0.6800/0.6950 range. These trades will profit as long as the AUD/USD stays within this channel until expiration. This perspective aligns with the latest inflation data, showing Australia’s quarterly CPI at 3.1% and the US core PCE steady at about 2.8%. These numbers are not alarming enough to prompt immediate policy changes from either central bank. Traders should keep an eye on upcoming employment data from both countries, as this could be the next significant market-moving event. Create your live VT Markets account and start trading now.

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