The AUD/USD pair increased by 0.35%, reaching about 0.6710. This rise is largely due to the weakness of the US Dollar during the European session. This dip followed claims that Fed Chair Jerome Powell mismanaged renovation funds for the Fed’s Washington headquarters. Currently, the US Dollar Index is down by 0.3% at around 98.80. Powell stated that these accusations aim to pressure a cut in interest rates. Traders are looking forward to the latest US Consumer Price Index (CPI) data and Australia’s employment statistics.

Bullish Trend Continues

The AUD/USD pair shows a bullish trend, with prices above the 20-day EMA at 0.6681. A strong 14-day RSI at 59 supports this rise. If the pair maintains its momentum, it could reach 0.6800. However, if it closes below the EMA, it may retreat to 0.6618. The US Dollar is the most traded currency globally, involved in 88% of forex transactions. The Federal Reserve influences its value with monetary policy, adjusting interest rates to maintain price stability and full employment. Generally, quantitative easing weakens the USD, while quantitative tightening strengthens it. The criminal charges against the Federal Reserve Chair are unprecedented and raise concerns about the central bank’s independence. The US Dollar Index is falling toward 98.80 as the market anticipates potential leadership changes or politically motivated rate cuts. This immediate dollar weakness is a key focus for traders. This political uncertainty is causing increased market volatility, presenting chances for options traders. The Cboe FX Volatility Index (FXVIX) surged by 12% today, its largest jump since the banking stress in mid-2025. Strategies like long straddles or strangles on major currency pairs could be beneficial to take advantage of the expected price swings, regardless of direction.

Critical Inflation Data

Tomorrow’s US Consumer Price Index data for December is crucial. After core inflation remained above 3.5% for most of the last quarter of 2025, a low reading could back the narrative of Fed weakness and accelerate the dollar’s decline. Conversely, a high inflation figure would create significant conflict, balancing high inflation against a politically challenged Fed. For the AUD/USD pair, the most favorable direction seems to be upward, aiming at 0.6800. We should consider buying call options or setting up bull call spreads to benefit from this trend while managing our risk. The 20-day EMA at 0.6681 is an important support level to monitor. The Australian employment data coming out on Thursday could further influence this movement. The Reserve Bank of Australia is signaling a hawkish stance, and a strong jobs report would strengthen that perspective further, boosting the Aussie. If expectations are exceeded, the AUD/USD pair could easily break through the 0.6750 resistance level. Given the general weakness of the dollar, we should also explore opportunities beyond the Aussie dollar. The British Pound is showing significant strength against the dollar today, and positions in GBP/USD might yield even greater returns. In this uncertain environment, it’s crucial to remain flexible and use options to manage risk due to the high headline risks from Washington. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now