The AUD/USD currency pair climbed sharply over the past 72 hours, underpinning a broad reversal in sentiment that has seen the Australian dollar reach its strongest levels since late 2024. As markets digest fresh data and forward guidance from central banks, traders are increasingly betting on continued outperformance of AUD/USD amid monetary policy divergence and shifting macroeconomic indicators.
AUD/USD traded above 0.6730 on Thursday after China’s surprising manufacturing PMI expansion and resilient Australian inflation data reinforced projections of RBA tightening. China’s official PMI for December rose above the 50 expansion threshold, lifting commodity prices and bolstering risk assets, including the Australian dollar.
The pair’s rally follows a renewed assessment by major banks that the RBA may deliver an interest rate hike as early as the February monetary policy meeting if inflation proves stickier than expected. Traders positioned aggressively for AUD/USD gains, viewing a hawkish turn at the RBA as a key fundamental break from expectations earlier this year that the bank would remain on hold.
Simultaneously, U.S. economic data has been mixed, with recent labor market readings showing signs of cooling pressure and CPI inflation moderating. Such dynamics have muted the greenback’s appeal and enhanced AUD/USD’s relative strength.
Technical indicators support the recent bullish move, with AUD/USD breaking above resistance near 0.6700 and maintaining momentum above its 20‑day moving average, a signal that short‑term bullish sentiment remains robust. However, analysts caution that overbought conditions could temporarily cap further near‑term gains.
Investors are now focused on key U.S. labor market data scheduled for release later this week, which could materially shift the AUD/USD trading range. A stronger than forecast non‑farm payrolls figure would likely strengthen the dollar and compress the AUD/USD rally, while a weaker read could validate the pair’s upside trajectory.
Meanwhile, Australia’s November trade balance report showed a sharper than expected contraction in the surplus, a factor that might have weighed on AUD/USD under different circumstances. Yet, the broader currency strength suggests that underlying demand for the Australian dollar has absorbed this downside surprise.
Market sentiment is also being shaped by futures markets, where positioning data indicates increased long exposure to AUD/USD. Options markets show elevated implied volatility ahead of the upcoming CPI and U.S. employment data, signaling that participants are hedging for larger directional moves.
Overall, the outlook for AUD/USD remains cautiously bullish, contingent on upcoming economic releases and evolving central bank rhetoric. Traders will closely monitor both Australian CPI figures and U.S. inflation and labor data to gauge the sustainability of the current run in AUD/USD.
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