The AUD/USD fell to 0.6715 after failing to break through 0.6740 earlier. The US Dollar gained strength on Monday, causing the Australian Dollar to lose its earlier gains. Traders are being careful with the US Dollar as they await important unemployment figures later this week. These numbers could shed light on the Federal Reserve’s next moves. Recent US data showed a decline in manufacturing activity, the biggest drop in 14 months, according to the ISM Services Purchasing Managers’ Index. December’s ISM Manufacturing PMI dropped to 47.9 from 48.2 in November, despite predictions for a slight increase.

Neel Kashkari’s Comments

Minneapolis Fed President Neel Kashkari suggested there might be rate cuts due to rising unemployment risks. Meanwhile, in Australia, strong consumer inflation figures have led many to believe the RBA might raise rates soon. Key reports, including the Australian S&P Global Services PMI and monthly CPI, are set to be released on Wednesday and are crucial for confirming these expectations. The Services PMI is an important measure for Australia’s services sector performance. A score above 50 indicates growth. Investors will closely watch its release, as it can predict trends in GDP, jobs, and inflation. The next update is due on January 6, 2026. There’s a growing split between the US Federal Reserve and the Reserve Bank of Australia’s policy outlooks. Markets are increasingly expecting the RBA to raise rates to control inflation while anticipating Fed rate cuts due to a slowing US economy. This difference may lead the AUD/USD to rise in the upcoming weeks.

Economic Indicators and Strategies

The argument for a weaker US dollar is gaining strength, especially after the recent ISM Manufacturing PMI showed the fastest contraction in 14 months. This trend follows the disappointing November jobs report, which only added 155,000 jobs when many expected more. These signs of a slowing economy likely influence Minneapolis Fed President Kashkari’s recent concern about unemployment. On the other hand, the Australian dollar is supported by ongoing inflation, a key issue we’ve been tracking for the past year. November 2025’s annual inflation rate surprised many at 4.5%, putting pressure on the RBA to act. Thus, the upcoming monthly CPI data is vital; a high number would likely strengthen the case for a rate hike. For traders, this uncertain environment makes options strategies appealing to manage the expected volatility. Buying AUD/USD call options set to expire in February may be a smart way to prepare for a potential rally after this week’s data. This method allows traders to gain profit while limiting their risk to the premium they pay. This trading approach is backed by current market data, showing nearly a 70% chance of a Fed rate cut by June. In 2025, Australian CPI releases often led to daily moves over 1%, highlighting the need to manage risk around these key announcements. A rise above the 0.6740 resistance level could indicate the start of a stronger trend. Create your live VT Markets account and start trading now.

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