The AUD/USD exchange rate has reached a yearly high of 0.6717, thanks to the strong performance of the Australian Dollar. This rise is tied to the Reserve Bank of Australia’s (RBA) talks about possible interest rate increases in 2026 to control inflation, according to recent meeting minutes. The RBA meeting minutes, released two weeks after the decision, show discussions on monetary policy. There is a 27% chance of a rate hike by February, which could rise to full expectation by June. Meanwhile, the US Dollar is seeing a sharp decline as traders expect rate cuts from the Federal Reserve in 2026, leading the US Dollar Index to an 11-week low.

Technical Analysis Of AUD/USD

From a technical viewpoint, AUD/USD is above 0.6700, supported by a rising 20-week Exponential Moving Average at 0.6561. The 14-day Relative Strength Index stands at 60.93, indicating a positive trend that allows for further price increases. The trend looks solid, suggesting potential gains towards 0.6810 if the weekly close exceeds 0.6700. For traders, the RBA minutes are crucial as they provide valuable insights into monetary policy discussions and economic assessments that affect the Australian Dollar. Understanding these insights can help assess market conditions and exchange rate movements. The Australian Dollar is showing significant strength against the US Dollar, moving above 0.6700 for the first time this year. This is influenced by a clear divergence in central bank policies, with the RBA considering rate hikes for 2026, backed by the October 2025 quarterly inflation report that showed a CPI of 3.8%.

US Dollar Outlook

Conversely, the US Dollar is weakening as traders anticipate the Federal Reserve will start cutting rates. The latest Core PCE data for November 2025 was 2.5%, getting closer to the Fed’s target and supporting this dovish view. Additionally, weaker-than-expected US retail sales recently indicate that consumer spending in the US is slowing down. In the coming weeks, strategies that take advantage of further AUD/USD increases could be beneficial. Buying call options with strikes around 0.6800 is a straightforward way to capitalize on this momentum into January. With lower trading volume during the holiday season, a bull call spread might be a better, cost-effective way to manage risk and determine potential profits. We see strong technical backing as the pair maintains its position above the 20-week moving average near 0.6561. As long as it stays above this level, the upward trend is likely to continue, making dips good buying opportunities. The RSI indicator still has room to grow before reaching overbought levels, suggesting that the upward movement might not be over. This pattern has occurred in previous cycles where different monetary policies lead to sustained currency trends for months. Since the beginning of 2025, the pair has steadily climbed from around the 0.6400 mark, and this new hawkish signal from the RBA could spur the next rally. The focus will be on whether upcoming employment and inflation data from both countries continue to support this divergence into the new year. Create your live VT Markets account and start trading now.

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