The AUD/USD pair fell to about 0.6680 during the European trading session on Wednesday, as the US Dollar Index reached a new weekly high. The FOMC minutes showed that policymakers are leaning towards more interest rate cuts to ease pressure on the job market, even after a recent reduction of 25 basis points, which now puts rates between 3.50% and 3.75%. The US Dollar Index, which tracks the USD against six major currencies, climbed close to 98.35. The FOMC minutes suggested that most members of the committee prefer a neutral policy to avoid worsening the job market. On the other hand, the Australian Dollar is trading lower as we approach 2025, with inflation data being a significant concern for 2026.

Technical Overview

The AUD/USD is trading slightly lower around 0.6685 but is above a rising 20-day Exponential Moving Average (EMA) at 0.6651. A positive 14-day Relative Strength Index (RSI) at 61 shows bullish momentum. If the pair consistently closes above the rising average, it could indicate further gains, with a daily close above 0.6725 potentially reaching 0.6800. The FOMC minutes released by the Federal Reserve give us a look into future US interest rate policies, directly affecting the strength of the USD. Published three weeks after each policy decision, these minutes help shape the economic outlook and market reactions. As we wrap up 2025, the AUD/USD is experiencing a slight dip near 0.6680, primarily due to short-term strength in the US dollar. The recent FOMC minutes suggest a path of cutting interest rates to support the US job market, indicating that the dollar’s strength may not last into the new year.

Monetary Policy Influences

This is an important signal, especially with November 2025 showing the US unemployment rate rising to 4.1%. The Fed’s commitment to preventing job market weakness reinforces our belief that it will continue to lower rates. Historically, a dovish Fed tends to put pressure on the USD. In contrast, the Reserve Bank of Australia is dealing with a different issue: persistent inflation. The latest quarterly figures from 2025 show Australian inflation stubbornly high at 3.8%, well above the target. The RBA has indicated it may raise interest rates again if this trend continues into 2026. The growing divergence between the Fed’s rate-cutting approach and the RBA’s potential rate hikes makes a strong case for an increase in AUD/USD in the coming weeks. The technical outlook supports this, with the pair remaining above its rising 20-day average. We view any dips towards the 0.6650 level as possible buying opportunities. For derivative traders, this suggests that buying AUD/USD call options with strike prices near 0.6750 or 0.6800 could be a solid strategy. Choosing expirations in late January or February 2026 would allow enough time for the market to react to the central banks’ differing paths. The RSI at 61 indicates there’s still potential for upward movement before the market becomes overbought. Alternatively, selling cash-secured put options with a strike price below the key support level of 0.6600 could generate income. This strategy profits if the AUD/USD remains above that level, which we expect. Traders should be ready for increased volatility around the next Australian inflation data release in early 2026. Create your live VT Markets account and start trading now.

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