Australian Dollar steadies despite upbeat China PMI data

The Australian Dollar (AUD) inches higher against the US Dollar (USD), holding ground for the second successive session. Volumes are expected to be thin due to the New Year’s holiday in Australia.

The AUD/USD pair moves little following the release of China’s official Manufacturing Purchasing Managers’ Index (PMI), which rose to 50.1 in December, compared to 49.2 in the previous reading. The reading came in above the market consensus of 49.2 in the reported month. The NBS Non-Manufacturing PMI climbed to 50.2 in December versus November’s 49.5 figure. The market forecast was for a 49.8 print.

The AUD finds support amid growing expectations of interest rate hikes from the Reserve Bank of Australia (RBA). RBA Governor Michele Bullock said earlier that although the board did not explicitly consider a rate hike, it discussed the conditions under which interest rates might need to increase in 2026.

The RBA December Meeting Minutes indicated that policymakers stand ready to tighten policy if inflation fails to ease as expected, placing increased focus on the Q4 CPI report due January 28. Analysts note that a stronger-than-expected Q4 core inflation reading could trigger a rate hike at the RBA’s February 3 meeting.

US Dollar gains following FOMC Meeting Minutes

• The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is holding ground after registering modest gains in the previous session. The DXY is trading around 98.20 at the time of writing.
• Federal Open Market Committee (FOMC) December Meeting Minutes, released on Tuesday, revealed that most participants judged that it would likely be appropriate to stand on further rate cuts if inflation declined over time. Meanwhile, some Fed officials said it might be best to leave rates unchanged for a while after the committee made three rate reductions this year to support the weakening labor market.
• The CME FedWatch tool shows an 85.1% probability of rates being held at the Fed’s January meeting, up from 83.4% a day earlier. Meanwhile, the likelihood of a 25-basis-point rate cut has fallen to 14.9% from 16.6% a day ago.
• The Fed lowered interest rates by 25 basis points (bps) at the December meeting, bringing the target range to 3.50%–3.75%. The Fed delivered a cumulative 75 bps of rate cuts in 2025 amid a cooling labor market and still-elevated inflation.
• US Initial Jobless Claims declined to 214K from 224K in the prior week, beating the 223K market forecast. Meanwhile, Continuing Jobless Claims rose to 1.923 million from 1.885 million, while the four-week average of Initial Claims edged lower to 216.75K from 217.5K.
• Australia’s headline inflation rose to 3.8% in October 2025 from 3.6% in September, remaining above the RBA’s 2–3% target range. As a result, markets are increasingly pricing in a rate hike as early as February 2026, with both the Commonwealth Bank of Australia and National Australia Bank projecting a rise to 3.85% at the RBA’s first policy meeting of the year.
• Australia’s Consumer Inflation Expectations rose to 4.7% in December from November’s three-month low of 4.5%, supporting the Reserve Bank of Australia’s (RBA) hawkish stance.

Australian Dollar tests 0.6700 barrier amid persistent bullish bias

AUD/USD is trading around 0.6690 on Wednesday. The technical analysis of the daily chart indicates that the pair remains within the ascending channel pattern, suggesting a persistent bullish bias. The pair holds above the rising nine-day Exponential Moving Average (EMA), keeping the short-term uptrend intact. The average has firmed across recent sessions, reinforcing dip-buying interest. The 14-day Relative Strength Index (RSI) at 64.8 (bullish) and edges higher, still short of overbought.

The AUD/USD pair is testing the immediate barrier at the psychological level of 0.6700, followed by 0.6727, the highest level since October 2024, reached on December 29. Further advances above the latter would support the pair to explore the region around the upper boundary of the ascending channel at 0.6850.

On the downside, the initial support lies at the nine-day EMA of 0.6684, aligned with the lower ascending channel boundary around 0.6680. A break below the channel would open the door for the AUD/USD pair to navigate the region around the six-month low near 0.6414, marked on August 21.

(The technical analysis of this story was written with the help of an AI tool.)