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January 2, 2026

AUD/USD Climbs Toward 0.6700 After RBA Minutes Signal Conditional Tightening

Introduction — What moved AUD/USD

AUD/USD moved higher toward the 0.6700 area after the Reserve Bank of Australia's December minutes and comments from Governor Bullock underscored that policymakers remain prepared to tighten policy if inflation does not fall as expected. The advance was reinforced by softer US dollar sentiment, where markets are pricing in multiple Fed rate cuts in 2026 following December FOMC minutes. At the same time, Australia's PMI unexpectedly rose to 51.6 in December, the strongest three-month reading for activity, providing additional support.

Key drivers

RBA: conditional hawkishness

The RBA hawkish shift minutes signalled that officials "stand ready to tighten" if inflation proves sticky. That conditional language has increased short-term hawkish bets for the AUD, as markets assess the likelihood of policy divergence should US rates move lower while Australia holds the line.

US dollar dynamics and Fed expectations

FOMC minutes that left the door open to cuts in 2026 have pushed USD sentiment softer. Futures markets currently price in about two Fed cuts this year, which lowers the opportunity cost of holding higher-risk currencies and commodities and provides a tailwind for AUD/USD.

Economic data and commodity exposures

Australia's PMI at 51.6 suggests modest expansion, helping the AUD. However, the AUD is also sensitive to China growth outlook and iron-ore prices. Any deterioration in China or a sharp fall in iron-ore would remove a key demand pillar for the currency.

Technical outlook

Short-term momentum is bullish toward 0.6700. Traders should watch these levels and reaction points:

Resistance

0.6700 is the immediate psychological resistance. A convincing daily close above this level could open the way toward 0.6800 in a momentum-driven scenario.

Support

Immediate support sits around 0.6600. A break below that on a pickup in USD strength or weak China/iron-ore data would increase the risk of a deeper correction toward 0.6500.

Risks and what could reverse the move

Key risks to the bullish case include: unexpectedly weak Chinese growth, a collapse in iron-ore prices, or a sudden re-acceleration of the USD if Fed cut expectations fade. Domestic inflation easing faster than anticipated would also reduce the chance of RBA tightening and could trigger AUD weakness.

Practical trade ideas and risk management

For traders considering exposure to AUD/USD:

  • Use pullbacks for entries: consider scaling into longs on dips toward 0.6620-0.6650, with initial stops below 0.6580 to control downside risk.
  • Define targets and time horizons: short-term traders may target 0.6700 then 0.6750–0.6800 if momentum persists; longer-term traders should monitor central-bank communications and China data.
  • Manage correlation risks: AUD is correlated with commodity prices and EM sentiment—hedge or size positions accordingly.

How traders can use automation and tools

Given the speed at which central-bank language and risk sentiment can shift, many traders use algorithmic assistance to execute disciplined plans. A Forex Trading Bot can help automate entries, exits, and position sizing around the levels discussed above. For discretionary traders who want automated trade management while keeping strategy oversight, the Trade Assistant Bot can enforce stop-loss discipline and scale positions according to predefined rules.

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Conclusion

AUD/USD's advance toward 0.6700 reflects conditional RBA hawkishness and a softer US dollar driven by Fed-cut expectations, supported by resilient Australian activity. Traders should balance bullish momentum with the real risks from China and commodity markets and use clear risk-management plans. Automated tools can help implement those plans efficiently.

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