Australian Dollar Gains Against US Dollar

The Australian dollar saw a slight increase against the US dollar on Friday, marking its second consecutive day of gains. The AUD/USD pair remained in focus as Australia’s S&P Global Manufacturing Purchasing Managers Index (PMI) preliminary reading for January came in at 52.4, up from 51.6 previously. The Services PMI for January also rose to 56.0 from 51.1, and the Composite PMI increased from 51.0 to 55.5.

This positive PMI data, combined with an Australian employment report released on Thursday, has led some to speculate that the Reserve Bank of Australia (RBA) might consider tightening its monetary policy. Notably, December saw an employment change of 65,200 jobs added, a significant shift from the previously reported loss of 28,700 jobs (which had been revised from 21,300). Additionally, the unemployment rate decreased to 4.1%, down from 4.3%, contrasting with market expectations of 4.4%.

The AUD/USD also gained strength as the US dollar weakened amid a rise in risk aversion, likely spurred by escalating tensions involving the US and Greenland. However, sentiment improved somewhat when US President Donald Trump shifted his stance after reaching a framework agreement with NATO regarding a potential future deal on Greenland.

US Dollar Weakens Ahead of PMI Data

• The US dollar index (DXY), which evaluates the dollar’s value against a basket of six major currencies, has remained stable around 98.30. Traders are currently looking forward to the forthcoming preliminary results of the US S&P Global Purchasing Managers’ Index (PMI), expected later today.
• The US gross domestic product (GDP) annualized growth for the third quarter of 2025 was reported at 4.4%, slightly exceeding both expectations and the prior figure of 4.3%. In addition, new unemployment insurance claims last week totaled 200,000, which was below the anticipated 212,000.
• The US Personal Consumption Expenditures (PCE) price index rose by 2.8% year-on-year in November, compared to 2.7% in October. On a month-to-month basis, the PCE price index saw a 0.2% increase. The Core PCE Price Index, considered by the Federal Reserve as a key inflation indicator, rose 2.8% in November, aligning with market expectations.
• President Trump has indicated he will refrain from imposing tariffs on products from European nations that resist attempts to claim Greenland. Previously, he stated it was “no going back” on his Greenland ambitions, even threatening new 10% tariffs on eight EU countries.
• Trump also mentioned that the US and NATO have “formed the framework for a future agreement on Greenland.” However, the specifics of this framework remain unspecified, leaving its implications unclear.
• Officials from the Federal Reserve have noted that there is little urgency for additional easing unless there is clear evidence indicating inflation is sustainably moving toward the 2% target. Morgan Stanley analysts have updated their forecasts for 2026 to now expect a rate cut in June followed by another in September, adjusting from earlier predictions of cuts in January and April.
• The People’s Bank of China announced on Tuesday that it would keep the lending prime rate (LPR) steady, with the one-year LPR at 3.00% and the five-year LPR at 3.50%. This is noteworthy, as shifts in the Chinese economy can significantly impact the Australian dollar, given their close trade relationship.
• The International Monetary Fund (IMF) has urged the RBA to act cautiously, pointing out that inflation has remained above the central bank’s target range of 2-3% for an extended period, despite a significant drop in the headline CPI reported for November.
• Australia’s TD-MI inflation rate for December was reported at 3.5% year-on-year, a rise from 3.2% previously. Month-on-month inflation accelerated by 1.0% in December 2025, marking the fastest pace since December 2023, a marked increase from the previous two months’ slow growth of 0.3%.
• RBA policymakers acknowledged that while recent data exhibits renewed upward momentum, inflation levels have significantly eased since their peak in 2022. Headline CPI saw a slowdown to 3.4% year-on-year in November, the lowest since August, yet still exceeds the RBA’s target range. The average adjusted CPI was recorded at 3.2%, slightly lower than October’s eight-month high of 3.3%.

AUD/USD Trading Insights

The AUD/USD pair was trading around 0.6850 on Friday. Daily chart analysis suggests the pair has risen above an ascending channel pattern, indicating a bullish trend. The 9-day exponential moving average (EMA) is positioned above the 50-day EMA, and the spot price is also above both, reinforcing upward momentum. However, the 14-day relative strength index (RSI) indicates it is overbought at 74.96, suggesting a potential lack of momentum.

A daily close above this channel could propel the AUD/USD closer to its February 2023 peak of 0.6942. On the flip side, the main support lies at the 9-day EMA at 0.6762. If the price drops below this short-term average, it may weaken momentum and target the ascending channel border at 0.6680, followed by the 50-day EMA at 0.6664.