The Australian Dollar fell against the US Dollar as China’s RatingDog Manufacturing PMI slightly improved to 50.3 in January. Australia’s TD-MI Inflation rose to 3.6% year-over-year, with a monthly increase slowing to just 0.2%. Despite a 4.4% rise in ANZ Job Advertisements, the Australian Dollar stayed weak as the Reserve Bank of Australia kept the cash rate steady at 3.6%. **US Dollar Resilience** The US Dollar had little movement as traders waited for the upcoming ISM Manufacturing PMI data. It had previously strengthened after Kevin Warsh was nominated as the new Federal Reserve Chair, suggesting a cautious approach to monetary policy. US producer-side inflation remained at 3.0% year-over-year, supporting a stable policy rate. Core PPI also increased to 3.3%. The AUD/USD pair showed some positive signs, trading around 0.6940, with main support at 0.6927. It might rise towards 0.7093, supported by the nine-day moving average. Australia’s Consumer Price Index held steady at 3.8% year-over-year in December, affected by PMI and employment data. Overall, the Australian Dollar faces pressure from both global and local economic indicators. The US Dollar appears strong, and we believe this trend could continue in the coming weeks. Markets expect a high chance of a rate hike from the Reserve Bank of Australia tomorrow, but Kevin Warsh’s nomination as Fed Chair suggests a more careful US monetary policy. This shift in the US is currently overshadowing the Reserve Bank’s anticipated hawkish stance. Recent US economic data supports this view. The January Non-Farm Payrolls report showed a solid addition of 295,000 jobs, far exceeding expectations. A strong labor market gives the Federal Reserve little reason to ease policy soon. Therefore, the most likely direction for the US Dollar looks to be upward for now. **Australian Dollar Outlook** From our perspective, the Australian Dollar has challenges, even if the RBA raises rates as expected. Chinese manufacturing data from January showed only slight improvement, and iron ore futures have stayed around $130 per tonne, not providing much of a boost. This indicates that buying put options on the AUD/USD, with strike prices below the 0.6900 support level, might be a wise strategy for potential downside. The mixed signals from central banks are likely to create more market volatility in the near future. Looking back at data from late 2025, we saw Australian inflation and employment figures doing well, yet the currency struggled to gain ground. For traders expecting sharp price movements but uncertain about the direction, using a long straddle with options around the RBA’s announcement could be a way to capture significant moves either way. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now