The Australian dollar has drawn fresh buying interest after RBA Governor Michele Bullock suggested in her post-meeting remarks that further rate cuts may not be necessary. Bullock even noted the board discussed scenarios that could warrant tightening. Coupled with a slight pullback in the US dollar, these comments have pushed AUD/USD back toward its highest levels since mid-September, bolstering bullish sentiment.
That said, a cautious overall market mood could weigh on the risk-sensitive Aussie ahead of Wednesday’s Federal Reserve decision. The Fed is widely expected to cut rates again, keeping the US dollar on the defensive. This divergence—an RBA leaning more hawkish while the Fed turns dovish—supports the case for AUD/USD to extend its recent two-week rally.
The RBA left its cash rate at 3.6% after the December meeting, emphasizing that it will remain data-dependent as it monitors inflation and economic risks. In the press conference, Bullock said that upcoming inflation and labor figures will be crucial for the February policy decision. She reiterated that the board no longer sees an urgent need for further cuts and even discussed conditions under which rates could rise.
Markets have repriced heavily for no additional RBA easing, as persistent inflation above the 2–3% target suggests limited room to loosen policy. Some analysts now believe the RBA may be done cutting and could consider tightening in 2026 if inflation remains stubborn and domestic growth holds up.
In the US, September’s Personal Consumption Expenditures Price Index rose 2.8% year-on-year—right in line with forecasts—and the core rate also eased to 2.8% from August’s 2.9%. Combined with signs of a cooling labor market, these data underpin expectations for a Fed rate cut. The CME FedWatch Tool shows traders assigning about a 90% probability to a 25-basis-point reduction on Wednesday, which should cap any significant rebound in the US dollar and continue to support AUD/USD.
Looking ahead, traders will take cues from Tuesday’s ADP employment report and JOLTS job openings, Wednesday’s Fed decision, and Thursday’s Australian employment figures. If bullish momentum holds, AUD/USD could target a retest of its year-to-date high just above 0.6700.
The AUD/USD pair has found support around the 0.6615–0.6620 area. Daily‐chart oscillators remain in positive territory and well clear of overbought levels, underpinning a near‐term bullish bias. A sustained break above the 0.6645–0.6650 zone—Monday’s multi‐month high—would pave the way for a challenge of the year‐to‐date peak just above 0.6700, last seen in September.
On the downside, a slip below the 0.6600 round figure could attract buyers back toward the 0.6560–0.6555 band. The next line of defense is the 100-day simple moving average near 0.6540–0.6535; a break below this could send AUD/USD down to the 0.6500 psychological level and potentially toward the 0.6480 horizontal support. Failure to hold these levels would invalidate the bullish outlook and shift the near‐term bias in favor of the bears, targeting the November low around 0.6420.
