• The AUD/USD outlook stays mildly bullish as the dollar loses traction after improved risk sentiment.
• AFR survey reveals the odds of the RBA tightening, while the US Fed is expected to ease further.
• Technically, the price lacks follow-through momentum amid overbought conditions.

After recording two straight sessions of gains, the Australian dollar continues its comeback against the US dollar into Tuesday. A weaker US dollar and increasing speculation that the Reserve Bank of Australia may not be done with its tightening cycle are supporting the AUD/USD pair. Australia’s November Consumer Price Index data, due to be released on Wednesday, could be crucial for the short term.

A recent survey of top economists, reported by the Australian Financial Review, has strengthened support for the Australian dollar by indicating that inflation pressures in Australia are likely to remain high in 2026. According to the survey, at least two more RBA rate hikes are anticipated, aligned with the central bank’s own statements. Governor Michele Bullock acknowledged that economic conditions requiring tighter policy were taken into consideration, maintaining hawkish expectations even though policymakers refrained from directly discussing a rate hike at the December meeting.

As markets reduce demand for safe havens, the US dollar has lost ground. Although geopolitical developments regarding Venezuela initially strengthened the greenback, investors have mostly ignored the situation and returned their attention to economic fundamentals. Weaker domestic data and cautious expectations from the Federal Reserve have caused the US Dollar Index to decline toward the 98.30 area.

The dollar came under more pressure after the release of US manufacturing data on Monday. A deeper decline in factory activity was evident in December as the ISM Manufacturing PMI dropped to 47.9, its lowest level since October 2024. The idea that US industrial momentum remains precarious was reinforced by the fact that declines in production and inventories outweighed slight increases in new orders. Although some officials advise patience if inflation continues to decline gradually, markets are still pricing in two additional rate cuts by the Federal Reserve in 2026.

China remains a significant swing factor for the Australian dollar. According to recent PMI data, manufacturing moved back into expansion territory while services activity slightly eased. Fears of a more severe slowdown in China, Australia’s biggest trading partner, have been allayed despite the modest improvement.

Upcoming data on both sides of the Pacific will continue to impact AUD/USD. While Friday’s US Nonfarm Payrolls report may determine whether the dollar can regain traction, a stronger Australian CPI print could boost expectations of RBA tightening and maintain pair support. Currently, the odds appear to be slightly in Australia’s favor.
 

AUD/USD Technical Outlook: Lacking Follow-Through
 

(Click on image to enlarge)

AUD/USD 4-hour chart
 

The AUD/USD price managed to break above the major supply area around 0.6720, with eyes on further upside while staying above the key MAs. However, the momentum lacks conviction, staying flat above the broken level as the RSI hits the overbought zone.

Immediate resistance for the pair lies around 0.6750, while the support emerges at 0.6700, near 50-period MA, ahead of 100-period MA, and swing low near 0.6670.

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