The Australian Dollar is gaining strength against the US Dollar, reaching the highest point since mid-September. This rise comes from the belief that the Reserve Bank of Australia (RBA) will keep interest rates steady. Currently, the AUD/USD is trading at around 0.6637, marking two weeks of growth in a row. The possibility of the RBA raising rates next year adds support to this trend, especially since the Federal Reserve is taking a softer approach. The technical chart shows a positive outlook, with the AUD/USD moving above important Simple Moving Averages. A strong support zone is established between 0.6550 and 0.6520, which could help prevent any sharp declines. The immediate resistance level is at 0.6650; breaking above this could push the currency pair toward a yearly high of 0.6707. Indicators like the RSI, which is near 68, and the ADX at 19 indicate a strengthening trend. Overall, both economic and technical factors favor the Australian Dollar right now. The RBA’s decision on interest rates, set for December 9, is an important economic event. The current and previous rates are both at 3.6%. The central bank meets eight times a year to review its monetary policy. The main factor in the market is the clear difference between the central banks. The Federal Reserve is indicating a softer stance, while the RBA is staying firm, which creates strong support for the AUD/USD. This policy split has driven the pair above the 0.6600 level recently. Confidence in the Australian Dollar comes from solid domestic data. For example, the unemployment rate fell to 3.7% in November, and inflation was still high at 3.8% in October. This suggests that the RBA will likely keep a firm stance on December 9, with potential rate hikes on the horizon for 2026. In contrast, the US Dollar’s weakness seems justified given the weakening economic signals. The latest Non-Farm Payrolls report from December 5 showed job growth slowing to just 120,000, and core PCE inflation decreased to 2.8%. These numbers support the expectation that the Fed will consider rate cuts for 2026 in their upcoming meeting. Given this outlook, we recommend strategies that could benefit from further increases in the AUD/USD into early next year. Buying call options with strike prices above the yearly high of 0.6707 could provide a leveraged way to ride the rally. Traders might also explore bull call spreads to reduce entry costs while limiting potential gains around the 0.6800 level. Expect implied volatility to rise as we approach the RBA and Fed meetings on December 9 and 10. While opinions are clear, any unexpectedly hawkish remarks from the Fed or dovish signals from the RBA could quickly change the current trend. It’s wise to use stop-losses or defined-risk options to manage this event risk. This situation reminds us of late 2023, when markets began pricing in Fed cuts while the RBA kept its rates steady. That period led to a sharp rally in the Australian Dollar. History shows that once these policy differences gain momentum, they tend to continue longer than many expect.

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