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The AUD/USD price begins 2026 with renewed bullish momentum as the RBA policy outlook shifts decisively back to inflation risk. A quarter ago, the consensus was built around further easing, but now the debate is whether the next move would be a hike. This has materially increased the appeal of the Australian dollar.

The Australian dollar has responded positively to this shift in expectations, climbing toward 0.6700 and trading near 14-month highs, supported by growing confidence that Australia’s policy path may soon diverge further from that of the United States. The Aussie finished 2025 up nearly 8%, the strongest annual performance since 2020.

Upbeat GDP and CPI, combined with a resilient labor market despite a rise in unemployment, have prompted the RBA to hold a hawkish stance in December. Money markets consider this the end of the easing cycle, following three cuts, with the cash rate remaining at 3.6%. With the risk of reigniting inflationary pressures, market participants are eyeing Q4 CPI as a potential policy catalyst.

Q4 inflation could surprise to the upside, as the trimmed mean inflation is already around the upper limit of the RBA’s target band. A stronger figure would cement the odds of a 25 bps rate hike in the Feb 03 meeting. Although the RBA left no signal for imminent tightening, the December minutes revealed clear conditions that required higher rates.

It is important to note that the central bank may not initiate an aggressive hiking cycle as the unemployment trend is expected to remain slightly higher through 2026. Under such conditions, one hike could push the cash rate to 3.85% followed by an extended hold until inflationary pressure cools.

Across the Pacific, the US dollar remains weak amid uncertainty surrounding the new Fed Chair and concerns about the Fed’s autonomy under the Trump administration. Moreover, markets anticipate two rate cuts in 2026, while recent FOMC minutes revealed a pause until inflation shows a clear downtrend.

AUD/USD Technical Outlook: Bullish Momentum Above 20-MA
 

AUD/USD 4-hour chart
 

The AUD/USD price is wobbling near the 20-period MA around 0.6700 with eyes on the swing high area above 0.6720. The pair found solid support near the 100-period MA at 0.6660 on the last day of 2025. The RSI has moved above the 50.0 level, indicating further gains.

The immediate resistance for the pair lies at 0.6700 (a round number), ahead of the December high at 0.6727 and then 0.6750. On the flip side, the 100-period MA at 0.6660 provides a strong support ahead of the confluence of the December swing low with the 200-period MA at 0.6600.

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