Australian Dollar Outlook: AUD/USD Extends Rally Into RBA, FOMC

The Australian dollar enters a critical week with the RBA decision on Tuesday, employment data on Thursday and a pivotal FOMC meeting in between. AUD/USD has already posted its best two-week rally since April, supported by rising yields, stronger risk sentiment and a softer US dollar. Whether that momentum extends or stalls now rests largely on the Fed’s updated rate projections.

View related analysis:

Australian Dollar Outlook

Australian Dollar Performance

AUD/USD was the strongest FX major last week, to mark its best 2-week run since the April low at 2.8%
AUD/JPY rose to a 71-week high thanks to a risk-on tone amid a weak Japanese yen environment
AUD/CHF reached a 25-week high as safe-haven currencies moved lower in tandem
EUR/AUD also fell to a 25-week low to suggest a larger move lower is now underway, following its inability to break above 1.8 in recent months
GBP/AUD looks set to be headed to 2.0 and potentially lower after momentum has realigned with its dominant bearish trend

Chart prepared by Matt Simpson - Source: LSEG

Australia This Week: Economic Data and Events for AUD/USD Traders

Date	AEDT (GMT +11)	Event
Tue 9 Dec	02:00	US Dallas Fed PCE (Sep)
	03:00	US 1-Year Consumer Inflation Expectations (Nov)
	11:30	AU Building Approvals (Oct), NAB Business Confidence (Nov)
	13:00	CN Trade Balance (Nov)
	14:30	AU RBA Interest Rate Decision (Dec) (Hold Expected))
	15:30	AU RBA Rate Press Conference
Wed 10 Dec	00:15	US ADP Employment Change Weekly
	11:30	AU RBA Chart Pack Release
Thu 11 Dec	06:00	US Fed Interest Rate Decision, Statement, Economic Projections
	06:30	US FOMC Press Conference
	08:45	NZ Electronic Card Retail Sales (Nov)
	11:30	AU Employment Change (Nov)
Fri 12 Dec	00:30	US Jobless Claims

Rates on Hold but Risks Still Tilt Hawkish

We’ve got an RBA meeting on Tuesday and employment data on Thursday. I should be more excited, but there’s little new to add: the RBA is almost certain to hold, cuts are firmly off the table, and another solid jobs report looks likely. Governor Bullock signalled last week that a hike is possible if inflation stays sticky — which effectively rules out any move this week given quarterly CPI isn’t released until late January. Ultimately, the Fed meeting remains the bigger driver for the Aussie via the US dollar.

Fed Meeting Remains the Dominant AUD/USD Catalyst

While the soft ADP print revived hopes for more Fed cuts next year, last week’s broader US data doesn’t justify a materially dovish stance. A 25bp cut is expected and likely, but ISM services remains in expansion, consumer sentiment is rising, layoffs are falling and jobless claims beat expectations. That’s not the backdrop for a noticeably dovish dot plot.

This is the final FOMC meeting of the year with updated staff projections, and traders will be focused on the 2025 rate path. Fed funds futures price an 86.2% chance of a 25bp cut this week, but only a 40.3% chance of another in April and 32.1% in September. The US dollar will take its lead from the median rate outlook. Three implied cuts would meaningfully pressure the dollar; two still allow December’s usual bearish USD seasonality to play out, while a third would amplify the move.

AUD/USD Correlations

Copper continues to show the strongest positive relationship with AUD/USD across the 10-, 20- and 60-day windows. That stands out given the sharp drop in the Aussie–yuan 10-day correlation to 0.37 over the past fortnight. The move is largely explained by the deeply inverted relationship between the US dollar and AUD/USD, sitting at -0.90 on the 10-day and -0.95 on the 20-day lookback.

Risk appetite remains supportive for the Aussie, with correlations to the S&P 500 and Dow Jones holding near 0.8 on the 10-day window and at least 0.85 on the 20-day. The 60-day correlations also sit just below 0.8.

Chart prepared by Matt Simpson - Source: LSEG

AUD/USD Technical Analysis: Australian Dollar vs US Dollar

Bond Yields and Options Flows Continue to Underscore AUD/USD Upside Bias

The top panel shows Australian 2-year yields trending higher since July, alongside a widening AU–US 2-year yield spread. Bond markets have been signalling this AUD/USD strength well in advance.
The lower-left panel shows 1-week implied volatility surging ahead of this week’s RBA and FOMC meetings, while 1-month volatility remains comparatively subdued and below the 1-week level.
Options flow continues to favour buying dips in AUD/USD, with both the 1-week and 1-month risk reversals rising — indicating call (bullish) demand outpacing put (bearish) demand.

Chart prepared by Matt Simpson - Source: LSEG

Rate-of-Change Study Hints at Slower Aussie Gains

The weekly chart includes a two-week percentage rate-of-change series with a 2% threshold. Recent history shows the Aussie rarely exceeds this threshold for three straight weeks — and most surges fade after a single break. With AUD/USD already delivering two strong weekly gains and the September high sitting just over 1% away, bullish momentum may ease this week, particularly if the Fed is not as dovish as markets hope.

Even so, a break above the September high later in the month remains a realistic scenario, given the US dollar’s tendency to underperform in the second half of December.

Chart analysis by Matt Simpson - data source: TradingView AUD/USD

Upside Targets Cluster Near 0.6700 and the September High

AUD/USD has rallied sharply from the 0.6420 low, with price moving almost vertically on the daily chart. The RSI(2) has pushed into overbought territory, yet no bearish divergence has formed, and the RSI(14) continues to confirm the broader uptrend without reaching overbought — a constructive signal for Australian dollar bulls.

A period of consolidation early in the week looks likely, with a potential retest of the October high at 0.6629. Even if momentum cools, a break below 0.6580 appears unlikely; that level aligns with a prior swing high and the 10-day EMA. Any dip into that zone is likely to attract buyers targeting a move toward the September high. The +1-week implied volatility band also sits just beneath 0.6700, adding further significance to that resistance area.

Chart analysis by Matt Simpson - data source: TradingView AUD/USD

View the full economic calendar

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

FOREX.com is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment and CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.forex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.forex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 42.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.

Delayed London Stock Exchange (LSE) Data

The London Stock Exchange (LSE) market data displayed or referenced on this website is provided on a delayed basis and is not in real time. The delay period may vary but is typically at least 15 minutes. This data is intended for information purposes only and should not be relied upon for trading, investment, or other financial decisions. We do not guarantee the completeness, reliability, or suitability of the data for any particular purpose. Users should consult real-time data sources and obtain professional advice before making any financial decisions.