The Australian Dollar fell even though China’s RatingDog PMI rose to 50.3 in January. Australia’s TD-MI Inflation climbed 3.6% year-over-year, but the monthly increase slowed to 0.2%, the lowest since August. The US Dollar could strengthen further due to Kevin Warsh’s nomination as Fed Chair, indicating cautious monetary easing. The AUD/USD pair stayed weak on Monday after a 1% loss the previous day. ANZ Job Advertisements in Australia grew 4.4% month-over-month in December 2025, marking the largest gain since February 2022. These developments come before the Reserve Bank of Australia’s meeting, where inflation and tight labor markets raise concerns.

Australian Economic Data

Australia’s Consumer Price Index rose by 3.8% YoY in December. The US Dollar Index (DXY) dipped after strong gains, trading near 97.10. US PPI inflation remained steady at 3.0% YoY in December. The Presidents of the St. Louis and Atlanta Fed emphasize keeping current policy rates, while Australia’s export prices increased by 3.2% QoQ in Q4 2025. The AUD/USD pair traded around 0.6940, with possible support at 0.6920. The Australian Dollar is influenced by the RBA’s decisions, China’s economic health, Iron Ore prices, and trade balance. The Australian Dollar was the weakest against the Euro. As the week starts, the Australian Dollar is under pressure, despite some positive data from China. The larger issue is the strengthening US Dollar, supported by the nomination of a more hawkish Fed Chair and persistent US inflation figures at the end of 2025. All attention is now on the Reserve Bank of Australia’s policy meeting tomorrow. The market appears to expect the RBA to raise rates, with a hike nearly fully priced in. This means that a simple rate increase might not boost the Aussie dollar, as it’s already anticipated. Derivative traders should be cautious of a potential dip in the AUD/USD if the RBA’s statements are not as aggressive as expected.

Trade Considerations

We also need to consider Australia’s key exports. The price of iron ore has softened, dropping from over $140 per tonne at the end of 2025 to about $130. Recent data also shows that China’s industrial profits grew at their slowest pace in months, indicating a potential challenge for the Australian Dollar. These outside factors suggest a more cautious approach to the currency. On the other hand, the US Dollar looks strong. Kevin Warsh’s nomination to lead the Fed indicates less inclination for rate cuts. Additionally, January’s US jobs data showed a solid gain of 225,000 jobs, supporting this narrative. Any rallies in the AUD/USD could be seen as selling opportunities in the coming weeks. The AUD/USD is currently just above the key support level around 0.6920. If it breaks below this level after the RBA meeting, we might see a quicker decline. Therefore, traders could consider buying put options with a strike price below 0.6900 to prepare for a potential downward movement. Create your live VT Markets account and start trading now.

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