AUD/USD Eyes Fresh Highs as RBA's Hawkish Stance Outweighs Sluggish Growth Data

2026-01-06 17:57:16

The Australian Dollar is staging a solid comeback against a weakening USD, brushing off disappointing economic growth figures. Here’s what traders need to watch.

GDP Miss Fails to Dampen Aussie Momentum

Australia’s economy grew just 0.4% quarter-on-quarter in Q3, down from 0.6% previously and missing the 0.7% consensus forecast. Annually, GDP growth stood at 2.1%, topping expectations slightly—but the quarterly miss sparked initial selling pressure during Asian hours.

The culprit? Slowing economic expansion. Yet the market’s reaction suggests traders are looking past the number. Why? Because the Reserve Bank of Australia’s messaging is anything but dovish.

RBA Governor’s Hawkish Tone Shields AUD

Michele Bullock, RBA Governor, delivered crucial comments before parliament, emphasizing the central bank is monitoring inflation closely. The key takeaway: if price pressures prove persistent rather than temporary, rate-cut hopes face headwinds.

That message matters. Australia’s headline CPI accelerated to 3.8% year-over-year in October from 3.5% the prior month. The RBA’s Trimmed Mean CPI also ticked higher to 3.3% from 3.2%—both readings remain above the RBA’s 2-3% target band.

Translation: don’t expect aggressive easing anytime soon. This hawkish tilt has offset the GDP disappointment and kept AUD/USD supported.

Fed Rate-Cut Bets Weigh on the Greenback

On the flip side, the US Dollar is under pressure from dovish Federal Reserve expectations. CME FedWatch data shows traders pricing in a roughly 90% probability of a 25-basis-point rate cut on December 10.

Combine that with speculation around a dovish next Fed Chair pick, and the USD hangs near its lowest levels since mid-November. This structural weakness in the dollar continues to provide a tailwind for AUD/USD.

Positioning for the Next Move: Technical Outlook

AUD/USD has broken above a key descending trendline and cleared the 100-day Simple Moving Average—both bullish signals. Oscillators are gaining momentum without reaching overbought extremes, suggesting further upside potential.

Resistance levels to watch:

0.6535-0.6530: Confluence zone (immediate target)
0.6600: Psychological level
0.6660-0.6665: Next hurdle
0.6700+: Year-to-date highs (September swing)

Support levels:

0.6500: Psychological floor
0.6465: 200-day SMA
0.6420: Multi-month low (November)
Below 0.6400: Fresh bearish trigger

A convincing break above 0.6535 opens the door toward 0.6700 and beyond. Conversely, failure to hold 0.6500 could accelerate losses toward 0.6420.

What’s Next? Watch the Data Calendar

Traders should monitor three critical releases:

US ADP Employment Report: Private-sector jobs data for fresh directional cues
ISM Services PMI: US service-sector activity gauge
Personal Consumption Expenditure (PCE) Index: Arriving Friday, this inflation gauge will heavily influence Fed rate-cut expectations and likely determine the next leg of AUD/USD’s move

Until then, the fundamental backdrop remains tilted toward bulls. The RBA’s hawkish tilt combined with Fed dovish bets creates a favorable environment for continued AUD/USD appreciation. Any pullback toward 0.6530-0.6535 could present an attractive buying opportunity for trend followers.

The risk scenario? A surprise hawkish Fed pivot or easing-on-hold signal could reverse course sharply.

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