AUD/USD Forex Signal: Bullish Outlook Driven by Fed–RBA Policy Divergence
GlobePRwire
The AUD/USD exchange rate has remained firmly in focus as global investors reassess monetary policy expectations following the latest Federal Reserve (Fed) decision. While the pair recently experienced a modest pullback, the broader technical and fundamental structure continues to support a bullish outlook, largely driven by growing policy divergence between the Fed and the Reserve Bank of Australia (RBA).
LFtrade experts offer a detailed and well-researched analysis of the subject in their latest piece.
AUD/USD Pulls Back but Holds Strong Gains
The AUD/USD pair retreated slightly after the most recent Federal Reserve meeting, where policymakers delivered a widely anticipated 0.25% interest rate cut. Following the announcement, the pair initially surged to a monthly high of 0.6685, reflecting expectations of a more accommodative U.S. policy stance. However, short-term profit-taking pushed the pair back to around 0.6653.
Despite this pullback, the Australian dollar remains significantly stronger than its November low of 0.6420, highlighting the persistence of a medium-term uptrend. This resilience suggests that bullish sentiment remains intact, particularly as investors continue to price in divergent central bank trajectories.
Fed and RBA Poised for Divergent Policy Paths
One of the key drivers behind the recent strength in AUD/USD has been the rising probability that the Federal Reserve and the Reserve Bank of Australia will move in opposite policy directions over the coming quarters.
Markets broadly expected the Fed’s recent rate cut, but its forward guidance attracted notable attention. Policymakers projected just one additional rate cut in 2026, signaling a cautious stance.
However, market participants remain skeptical of this outlook. The CME Fed Futures tool and leading prediction markets currently suggest that the Fed could deliver two to three rate cuts next year, especially if economic conditions soften.
Adding further uncertainty is the political backdrop in the United States. With the US President expected to announce a new Fed Chair next year, traders are factoring in potential shifts in policy leadership, which could alter the pace and direction of future interest rate decisions.
Upcoming U.S. Data to Shape Market Expectations
In the near term, the AUD/USD exchange rate will react to several high-impact U.S. economic releases, including inflation data and labor market reports later this week. These indicators will provide critical insight into the strength of the U.S. economy and help refine expectations for upcoming Federal Reserve meetings.
Any signs of cooling inflation or labor market weakness could reinforce expectations of further rate cuts, potentially weighing on the U.S. dollar and supporting additional gains in AUD/USD.
RBA Likely to Hold Rates as Inflation Stays Elevated
In contrast to the Fed’s easing bias, the Reserve Bank of Australia is expected to maintain a hawkish hold. Australian inflation has proven stubborn, limiting the central bank’s flexibility.
Recent data showed that the headline Consumer Price Index (CPI) rose to 3.8% in October, well above the RBA’s 2–3% target range. With inflationary pressures persisting, policymakers led by RBA Governor Michele Bullock are likely to keep interest rates unchanged in the foreseeable future.
This policy stance supports the Australian dollar, as higher relative yields tend to attract capital inflows, especially when compared to a potentially easing Federal Reserve.
AUD/USD Technical Analysis: Bulls Remain in Control
From a technical perspective, the daily chart remains bullish, favoring the upside. The AUD/USD pair has staged a strong rally over recent months, rising from a November low near 0.6400 to approximately 0.6653.
Several bullish technical signals stand out, as the pair has moved above the Ichimoku cloud, signaling a positive trend shift. Price action continues to hold above the 50-day moving average, reinforcing medium-term bullish momentum.
Additionally, the Relative Strength Index (RSI) has climbed close to the overbought zone, indicating strong buying pressure, while also hinting at the possibility of short-term consolidation.
Outlook: Upside Targets and Key Risk Levels
Given the combination of monetary policy divergence and supportive technical indicators, the AUD/USD outlook remains constructively bullish. Bulls are likely to target the psychological resistance level at 0.6800 in the coming sessions.
A decisive break above the year-to-date high near 0.6700 would serve as strong confirmation of continued upside momentum. However, traders should remain mindful of downside risks. A sustained drop below the key support level at 0.6600 would invalidate the current bullish scenario and signal a potential trend reversal.
Conclusion
In summary, the AUD/USD Forex signal continues to favor a bullish forecast, underpinned by Fed–RBA policy divergence, resilient Australian inflation, and a robust technical structure.
While short-term volatility may persist around upcoming economic data releases, the broader trend suggests that the Australian dollar could extend its gains against the U.S. dollar if current conditions remain in place.