AUD/USD Technical Outlook: Can the Rally Sustain as Momentum Shows Fatigue?

The Australian Dollar is approaching resistance levels as it consolidates recent gains against the US Dollar. Following Australia’s latest Consumer Price Index release, AUD/USD stabilized near 0.6738, maintaining proximity to 15-month peaks. The question for traders now centers on whether current momentum can persist or if a correction is imminent.

Economic Backdrop: Mixed Signals From Both Sides

Australia’s inflation narrative continues to improve, though not fast enough for policy hawks. November’s monthly CPI remained flat, matching October’s reading, while the annual rate decelerated to 3.4% from 3.8%—still above the RBA’s 2-3% comfort zone. The trimmed mean CPI, which policymakers favor for its consistency, expanded 0.3% monthly and 3.2% annually, both showing sequential moderation from prior periods.

On the American side, employment data delivered contradictory signals. Private payrolls in December surprised lower, increasing by just 41K against expectations of 47K, though this reversed November’s decline. Meanwhile, the ISM Services PMI printed at 54.4, accelerating from 52.6 and comfortably beating the 52.3 forecast. Job openings, however, fell to 7.146 million from 7.449 million, undershooting the 7.6 million estimate. These divergences suggest the labor market is gradually cooling without signaling acute weakness.

Technical Picture: Momentum Indicators Flash Warning Signs

From a charting perspective, AUD/USD’s near-term setup presents a nuanced picture. The Relative Strength Index is approaching extremes at 69, traditionally signaling overextension and implying potential for a retracement. The broader trend architecture, however, remains constructive—prices broke decisively through former resistance around 0.6550 and maintain positioning above both the 50-day and 100-day Simple Moving Averages, underscoring underlying strength.

Should profit-taking materialize, initial support lies near 0.6660. A breach of this area would threaten the bullish framework and open exposure toward 0.6590-0.6570, where the 50-day and 100-day SMAs converge to form a critical support cluster. The Average Directional Index near 35.36 confirms the trend carries meaningful momentum, reducing the probability of a quick reversal.

Path Forward: Upside Targets Remain Intact

If the current uptrend persists despite overbought signals, AUD/USD could target the psychological 0.6800 barrier. An advance beyond this level would create conditions for a push toward 2024 highs exceeding 0.6900. The technical structure ultimately suggests traders should monitor the RSI for divergence signals and watch for a close below 0.6660 as the first warning that the rally may be losing steam.