The AUD/USD is making a downward move, reaching around 0.6690 due to a weaker Australian Dollar. The trade surplus decreased to 2,936 million AUD in November, mainly from falling exports. In contrast, the AUD/USD has pulled back from the previous day’s high of 0.6766. The weak Consumer Price Index (CPI) and disappointing trade data are putting pressure on the Australian Dollar.

Australian Dollar Faces Challenges

Inflation in Australia rose by 3.4%, which is lower than the expected 3.7%, and it remained stable month-over-month. The Reserve Bank of Australia has indicated that interest rate cuts are not on the horizon, although rate hikes might still be possible. Exports dropped by 2.9% in November, following a rise of 2.8% the month before. Meanwhile, the US Dollar is holding steady, supported by strong ISM Services PMI data from December. The US Dollar Index has risen to about 98.86, marking a four-week high. The ISM reported an increase in Services PMI to 54.4 from 52.6 in November. Upcoming US Nonfarm Payrolls data is very important, scheduled for release on Friday, and it will be closely watched.

Economic Trends and Trading Outlook

We see the AUD/USD pair under stress, reminding us of the early part of 2025. Back then, the pair sharply fell from its highs after disappointing Australian economic figures for late 2024, which included an unexpected drop in the trade surplus and softer inflation data. In January 2025, the Reserve Bank of Australia maintained a tough stance, hinting at potential interest rate hikes even with cooling inflation. Deputy Governor Hauser remarked that rate cuts were “unlikely anytime soon” due to high inflation levels, which offered some temporary support for the Australian Dollar. At the same time, the US Dollar was gaining strength due to robust economic reports. The ISM Services PMI for December 2024 was significantly above expectations, driving the US Dollar Index to a four-week high. This created a favorable situation for a lower AUD/USD. Now, in early 2026, this gap seems to be widening again, setting up a promising trading scenario. The most recent Australian CPI data for November 2025 has dropped below the RBA’s target range at 2.8%, while the trade surplus shrank to just 1,950 million, influenced by declining iron ore prices. This is a stark contrast to the RBA’s position from a year ago. On the other hand, the latest US Nonfarm Payrolls report for December 2025 showed a solid increase of 195,000 jobs, surpassing market expectations. This strong performance in the US labor market suggests that the Federal Reserve is unlikely to quicken any potential rate cuts. The significant disparity in economic performance between the two countries indicates ongoing weakness for the Australian Dollar. Given this situation, traders should consider positioning for further declines in AUD/USD in the coming weeks. Buying put options on AUD/USD is a straightforward way to profit from a continued drop while managing risk. Bearish put spreads could also be considered to reduce the initial cost of the trade. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now