The AUD/USD pair has been stable, with US economic data and positive news from China balancing the situation. In November, US Retail Sales rose by 0.6%, which was better than expected, indicating strong consumer demand. The Producer Price Index grew by 3% year-over-year, and consumer inflation, shown through the CPI, increased by 2.7%, matching predictions.

Interest Rate Outlook

This information suggests the Federal Reserve might keep interest rates steady. In Australia, the Australian Dollar finds support from China’s trade surplus of $114.1 billion in December. Australia’s housing data also supports its currency, as building permits soared by 15.2% in November to nearly a four-year high, reflecting robust housing demand. These factors could affect the Reserve Bank of Australia’s approach to inflation. Right now, the AUD/USD pair is stable, waiting for new macroeconomic data for a clearer direction. Recently, the Australian Dollar showed slight strength against the US Dollar, and a heat map reveals percentage changes among major currencies. Currently, the AUD/USD pair is hovering around 0.6700, reflecting a rivalry between two strong forces: a robust US economy that is bolstering the dollar, and supporting local and Chinese data strengthening the Aussie. This situation indicates that making directional bets may be tricky in the coming weeks. The US economic outlook was reinforced by the December 2025 Consumer Price Index report, which showed a 3.1% annual increase. Although this is a drop from the highs in 2024, inflation remains above the Federal Reserve’s target. This supports our belief that the Fed is unlikely to cut rates before mid-year, providing a solid foundation for the US dollar. In Australia, fourth-quarter inflation in 2025 fell to a two-year low of 4.1%, but it’s still above the Reserve Bank of Australia’s target range of 2-3%. The strong building permit data from late 2025 also argues against any immediate changes in RBA policy regarding rate cuts. The difference in policies between the two central banks helps keep the currency pair contained.

Market Strategies and Outlook

However, the strong support for the Australian Dollar from China is facing challenges. While December 2025 trade data was good, we must be cautious due to reports about a major Chinese property developer entering liquidation. This ongoing property crisis in China poses a serious challenge for commodities, which in turn impacts the Australian dollar. This situation creates a classic range-bound market, ideal for strategies that thrive on low volatility. Derivative traders might consider selling options like strangles or iron condors to benefit from premium collection as the pair consolidates. A possible range to watch could be between 0.6550 and 0.6850, where the pair is expected to stay through January. Looking forward, key events will be the upcoming meetings of the central banks, with the Federal Reserve meeting at the end of this month and the RBA in early February. Any change in tone from either bank could be the catalyst needed to break the current stalemate. Until then, implied volatility is likely to remain low, favoring strategies that sell premium. Create your live VT Markets account and start trading now.

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