Australian Dollar rises while US Dollar weakens amid worries over the Federal Reserve

Australian Dollar Recovers as US Dollar Weakens

On Monday, the Australian Dollar (AUD) regained ground against the US Dollar (USD) after three consecutive days of declines. The AUD/USD pair moved higher as the US Dollar softened, likely due to renewed uncertainty surrounding the Federal Reserve.

According to a report from the New York Times, federal prosecutors have launched a criminal probe into Federal Reserve Chair Jerome Powell. The investigation centers on the renovation of the central bank’s Washington headquarters and whether Powell misled Congress about the project’s details.

In economic news, ANZ Job Advertisements dropped by 0.5% in December, following a revised 1.5% decrease in November. Meanwhile, household spending in Australia edged up by 1.0% month-over-month in November 2025, slowing from a revised 1.4% gain in October, as consumers remained cautious amid high interest rates and ongoing inflation.

Australia’s November Consumer Price Index (CPI) delivered mixed results, leaving the Reserve Bank of Australia’s (RBA) policy outlook unclear. However, RBA Deputy Governor Andrew Hauser noted that the inflation figures were largely in line with expectations and indicated that rate cuts are unlikely in the near future. Market attention now turns to the upcoming quarterly CPI report for further policy direction.

US Dollar Slides Amid Fed Uncertainty

• The US Dollar Index (DXY), which tracks the currency against a basket of six major peers, slipped to around 98.90 as of writing. The Greenback came under pressure as expectations for a dovish Federal Reserve grew. December’s weaker-than-expected US employment data suggested the Fed may keep rates steady at its next meeting.
• Nonfarm Payrolls (NFP) in the US increased by 50,000 in December, missing both the revised November figure of 56,000 and market forecasts of 60,000. However, the unemployment rate edged down to 4.4% from 4.6%, and average hourly earnings rose to 3.8% year-over-year, up from 3.6% previously.
• The CME Group’s FedWatch tool indicates that futures markets are pricing in a roughly 95% chance that the Federal Reserve will leave rates unchanged at its January 27–28 meeting.
• Richmond Fed President Tom Barkin welcomed the drop in unemployment and described job growth as steady but moderate. He also noted that hiring outside of sectors like healthcare and artificial intelligence remains limited, and it is still uncertain whether the labor market will shift toward more hiring or layoffs.
• US Treasury Secretary Scott Bessent told CNBC that the Federal Reserve should continue to lower interest rates, arguing that reduced rates are the missing factor for stronger economic expansion and that the Fed should not postpone further cuts.
• The US Department of Labor reported that initial jobless claims rose slightly to 208,000 for the week ending January 3, just below expectations of 210,000 but above the previous week’s revised 200,000. Continuing claims increased to 1.914 million from 1.858 million, indicating a gradual uptick in ongoing unemployment benefit recipients.
• According to the Institute for Supply Management (ISM), the US Services PMI climbed to 54.4 in December from 52.6 in November, surpassing the anticipated 52.3.
• Data from Automatic Data Processing (ADP) showed US private sector employment grew by 41,000 jobs in December, following a revised loss of 29,000 in November and coming in just below the expected 47,000. Job Openings and Labor Turnover Survey (JOLTS) figures showed 7.146 million openings in November, down from October’s revised 7.449 million and below the forecast of 7.6 million.
• China’s Consumer Price Index (CPI) increased by 0.8% year-over-year in December, up from 0.7% in November but short of the 0.9% projection. On a monthly basis, CPI rose 0.2%, reversing November’s -0.1%. Meanwhile, China’s Producer Price Index (PPI) dropped 1.9% year-over-year, an improvement from the previous 2.2% decline and slightly better than the expected -2.0%.
• The Australian Bureau of Statistics (ABS) reported that Australia’s trade surplus narrowed to 2,936 million in November, down from a revised 4,353 million previously. Exports fell by 2.9% month-over-month, following a revised 2.8% increase in October. Imports edged up by 0.2% in November, compared to a 2.4% rise in October.

AUD/USD Eyes Recovery Toward 0.6700 and Beyond

On Monday, the AUD/USD pair hovered near 0.6700. Technical analysis on the daily chart indicates the pair is attempting to rebound within an upward channel, suggesting renewed bullish momentum. The 14-day Relative Strength Index (RSI) stands at 58.33, remaining above the neutral level and supporting further gains.

If the pair can maintain its position within the channel, it could reinforce the bullish outlook and push AUD/USD toward 0.6766, marking its highest point since October 2024. Continued strength may see the pair challenge the upper boundary of the channel near 0.6860.

Immediate support is found at the nine-day Exponential Moving Average (EMA) of 0.6700, with additional support at the 50-day EMA of 0.6631. Should losses deepen, the next downside target would be 0.6414, the lowest level since June 2025.

AUD/USD: Daily Chart