The Australian Dollar is doing well against the US Dollar, reaching nearly two-week highs. The AUD/USD is testing the upper limit of a descending channel, where the 50-day and 100-day Simple Moving Averages (SMAs) meet, which is holding back further price increases. Recent inflation data from Australia has surprised markets, leading to fewer expectations for interest rate cuts. The Reserve Bank of Australia is expected to keep its interest rate at 3.60%, while the Federal Reserve may lower rates.

Technical Analysis

If the AUD/USD breaks above the 50- and 100-day SMAs, it could rise towards the November high of 0.6580 and reach the key level of 0.6600. Indicators like the MACD and RSI show a positive trend. Support is found at the 21-day SMA around 0.6506, with the next support level at 0.6450 if there’s a pullback. The Reserve Bank of Australia influences the Australian Dollar through interest rate changes and monetary policy decisions during both regular and emergency meetings. Inflation data affects the currency’s value since banks might raise interest rates, attracting more capital. Economic indicators such as GDP and employment data also play a role in the currency’s movement. Quantitative easing tends to weaken the AUD, while quantitative tightening strengthens it. The Aussie dollar is testing a key ceiling around 0.6530. This level has often stopped upward moves throughout November 2025. A solid breakout here could indicate a significant market shift.

Expecting A Breakout

The strength of the Australian Dollar stems from the belief that the Reserve Bank of Australia will keep its cash rate stable at 3.60% in the upcoming December meeting. This view gained traction after Australia’s Q3 2025 inflation report showed a higher-than-expected rate of 5.6%, and the October jobs report indicated unemployment steady at around 3.7%. This ongoing inflation makes it challenging for the RBA to think about easing its policies. On the other hand, the US Dollar is losing strength as we grow more confident that the Federal Reserve will cut rates in December 2025. Recent data supports this view, with the latest US Consumer Price Index for October 2025 dropping to 3.1% and retail sales showing a slight decline. The differing central bank policies are what mainly boost the AUD/USD pair. For traders anticipating a breakout above current resistance, buying call options with a strike price close to 0.6600 could be a good way to capture potential profits. A bull call spread might also help lower entry costs while still benefiting from a rise above the moving averages. Positive momentum indicators like the MACD give us confidence in this upward trend. However, since this technical barrier has held firm before, we should be cautious about the chance of another rejection. Traders who doubt a breakout could consider buying puts or establishing bear put spreads if the price fails near these moving averages. A drop back to the 21-day average near 0.6506 would be the first sign of this failure. Create your live VT Markets account and start trading now.

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