The Australian Dollar (AUD) is expected to test the 0.6680 level again before it can recover. Analysts believe it will not fall below 0.6655. Currently, the AUD is trading within a range of 0.6655 to 0.6745 over the long term. In the last 24 hours, the AUD dropped to 0.6682, which was unexpected since a consolidation between 0.6705 and 0.6745 was forecasted. Although the AUD declined, its downward momentum only increased slightly. It’s likely the AUD will retest 0.6680 before making any recovery. Resistance is expected at 0.6715 and 0.6730.

Momentum and Predictions

Looking ahead one to three weeks, the AUD recently rose to 0.6766 before falling back. While the upward momentum has slowed, the outlook remains positive as long as the AUD stays above 0.6690. A recent drop to 0.6682 shows weakened momentum, contributing to its current range of 0.6655 to 0.6745. These insights come from the FXStreet Insights Team. Reflecting on January 2025, the AUD was consolidating during this period. The expectation was that after a pullback, the AUD/USD would enter a range around 0.6655 to 0.6745. This view stemmed from reduced upward momentum after the pair couldn’t break higher. That range-bound view held true for a while, but later in the year, stronger commodity prices drove the pair higher. Fast forward to January 2026, and the situation has changed, with the AUD/USD now trading closer to 0.6950. Recent data shows that while Australian inflation has eased to 3.1%, it remains persistent, keeping the Reserve Bank of Australia from considering any rate cuts.

Strategic Considerations for Traders

In contrast, the United States has experienced a mixed jobs report, reinforcing the belief that the Federal Reserve will maintain current rates. With the US dollar weakening, a new higher range for the Australian dollar seems to be forming. For the next few weeks, a range between 0.6880 and 0.7000 appears likely. For derivative traders, the lower implied volatility creates a good opportunity for income-generating strategies. Selling an iron condor with short strikes around 0.6900 and 0.7000 could be a solid approach to profit from the expected range. This strategy benefits from time decay as long as the AUD/USD stays between the sold strike prices. Alternatively, for those who lean slightly bullish, a bull call spread can be used to limit risk. One option could be to buy a 0.6950 strike call and sell a 0.7000 strike call for February expiration. This method defines the risk while aiming for a modest increase due to stable iron ore prices, which have recently averaged over $130 per tonne. Key risks for these positions include next week’s US inflation data and any unexpected hawkish comments from Fed officials. A surprising increase in US CPI could quickly boost the dollar and push the AUD/USD below the bottom of our expected range. Thus, keeping an eye on these crucial economic releases is critical for managing risk. Create your live VT Markets account and start trading now.

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