The Australian dollar (AUD) rebounded against the US dollar (USD) on Monday, reversing three days of losses. This increase in the AUD/USD pair coincided with a decline in the dollar, potentially tied to emerging worries about the Federal Reserve’s stance.
A criminal investigation has been initiated by federal prosecutors concerning Federal Reserve Chair Jerome Powell. This involves renovations at the central bank’s headquarters in Washington and whether Powell misled Congress regarding the project’s extent, as reported by the New York Times on Sunday.
In December, job ads in Australia, reported by ANZ, dipped by 0.5% after a previously revised increase of 1.5% in November. Meanwhile, household spending saw a 1.0% rise month-on-month in November 2025, down from a revised 1.4% in October. This reflects a more cautious consumer sentiment amid ongoing inflation and rising interest rates.
The consumer price index (CPI) for November in Australia displayed mixed signals, leaving the Reserve Bank of Australia’s (RBA) policy outlook somewhat unclear. However, RBA Deputy Governor Andrew Hauser stated that the inflation data for November largely met expectations and indicated that a rate cut isn’t expected soon. Attention is now directed toward the upcoming quarterly CPI report, which could offer more insights on the RBA’s future actions.
US dollar dips amid Fed uncertainties
- Currently, the US Dollar Index (DXY), which gauges the dollar’s value against six major currencies, is at around 98.90. The dollar is struggling under the weight of a dovish outlook from the Federal Reserve. December’s slower job growth suggests that the central bank might opt to keep interest rates steady later this month.
- In December, U.S. non-farm payrolls (NFP) grew by 50,000—falling short of November’s 56,000 (which was revised from 64,000) and below the estimated 60,000. However, the unemployment rate dropped from 4.6% in November to 4.4% in December, with average hourly wages increasing from 3.6% to 3.8% year-on-year.
- Federal funds futures are indicating about a 95% probability that the Federal Reserve will keep interest rates unchanged in the upcoming Jan. 27-28 meeting, based on data from CME Group’s FedWatch tool.
- Richmond Fed President Tom Barkin mentioned that while the drop in unemployment is positive, the pace of job growth remains slow but steady. He noted the challenges many companies face in hiring outside the healthcare and AI sectors, leaving the trajectory of the labor market uncertain.
- In a recent interview, U.S. Treasury Secretary Scott Bessent asserted that the Fed should continue cutting interest rates, suggesting that such cuts are essential for boosting economic growth.
- The U.S. Department of Labor reported a slight uptick in new jobless claims to 208,000 for the week ending January 3, just beneath expectations of 210,000, but higher than the previous week’s revised count of 200,000. Concurrently, ongoing unemployment claims grew from 1.858 million to 1.914 million, signaling an increase in those receiving unemployment benefits.
- Wednesday’s release from the Institute for Supply Management (ISM) revealed that the U.S. services PMI for December stood at 54.4, a rise from November’s 52.6, surpassing the anticipated figure of 52.3.
- Changes in U.S. automatic data processing (ADP) showed an increase of 41,000 jobs in December after a decline of 29,000 in November, slightly below the market estimate of 47,000. In November, the Job Openings and Labor Turnover Survey (JOLTS) recorded 7,146,000 job openings, following a revised figure of 7.449 million in October.
- China’s CPI rose by 0.8% year-on-year in December, slightly up from 0.7% in November but below the expected 0.9%. On a monthly basis, the CPI increased by 0.2%, bouncing back from a decrease of -0.1% in November. Additionally, China’s PPI declined by 1.9% year-on-year in December, showing improvement over the previous drop of 2.2% and outpacing the expected -2.0% decline.
- According to the Australian Bureau of Statistics (ABS), Australia’s trade surplus in November narrowed to 2.936 billion, down from a revised 4.353 billion. Exports saw a decline of 2.9% from the prior month, contrasting with October’s increase of 2.8%. Meanwhile, imports rose by 0.2% month-on-month in November, a slowdown from October’s 2.4% growth.
Australian dollar trends towards an upward trajectory around 0.6700
The AUD/USD pair was around 0.6700 on Monday, with daily chart analysis indicating an attempt to recover towards an upward channel. The 14-day Relative Strength Index (RSI) remains above the midpoint, sitting at 58.33, hinting at positive momentum.
If this upward movement continues, it could reinforce a bullish trend, potentially pushing AUD/USD to 0.6766, a level not seen since October 2024. Further gains might lead the pair to test the channel’s upper boundary around 0.6860.
Immediate support is found at the 9-day exponential moving average (EMA) at 0.6700, with subsequent support at the 50-day EMA at 0.6631. Should it decline further, prices could drop to 0.6414, marking the lowest point since June 2025.
