AUD/USD Outlook: Aussie Strength Builds as Fed Fears Ease and Spending Surprises

AUD/USD started the week on the front foot as concerns around US monetary policy independence faded and domestic Australian data reinforced the case for a still-restrictive RBA. A recovery in global risk appetite, combined with resilient household spending, has helped the Australian dollar outperform other high-beta currencies.

Fed Independence Concerns Cool, Risk Appetite Recovers

Markets opened the week cautiously after Federal Reserve Chair Jerome Powell confirmed the Fed had been served DOJ subpoenas. While the official explanation centers on testimony related to renovations at the Fed’s headquarters, the timing raised broader concerns about potential political pressure on monetary policy.

For markets, the risk was not the investigation itself, but the perception that policy decisions could become politicized. That scenario would likely revive a broader “sell America” narrative, pressuring the US dollar, lifting long-end yields via higher term premiums, and weighing on risk assets.

However, sentiment improved as Republican senators Thom Tillis and Lisa Murkowski publicly committed to blocking any Trump Fed nominees until the DOJ investigation is resolved. Their stance significantly reduces the probability of the FOMC being reshaped in a politically motivated way, particularly if legal challenges around the dismissal of sitting Fed officials succeed. This has helped restore confidence in the Fed’s independence and eased fears of policy manipulation.

As those concerns receded, risk appetite improved, allowing high-beta currencies like the Australian dollar to regain traction.

Strong Spending Keeps RBA Tightening Risk Alive

Domestic fundamentals added to the Aussie’s strength. Australian household spending rose 1 percent in November, following an upwardly revised 1.4 percent gain in October. This marks the strongest run of consumption growth since late 2022, with annual growth accelerating to 6.3 percent.

Discretionary spending led the gains, supported by promotional activity and seasonal events. With Q4 consumption tracking well above Q3 levels, household demand is shaping up as a solid contributor to GDP growth.

This strength complicates the RBA’s policy outlook. If inflation data in Q4 remains sticky, the resilience in consumption strengthens the case for another rate hike as early as February. That prospect supports the Australian dollar through interest rate differentials, particularly at a time when markets are increasingly comfortable pricing US easing further out.

Technical Picture: Range Emerges After Rally

From a technical perspective, AUD/USD appears to be consolidating after its recent bullish push. The pair is finding demand near 0.6660, while upside momentum has struggled above 0.6720.

This zone defines the near-term range. Dips toward support may attract buyers with tight downside protection, while repeated failures above 0.6720 could encourage short-term sellers, especially if price stalls below the 0.6750 region that capped rallies multiple times in 2025 and again earlier this year.

Momentum indicators offer a neutral signal. RSI remains above 50 but continues to print lower highs, while MACD has crossed lower while staying in positive territory. With no strong directional bias from momentum, price action around upcoming catalysts is likely to be decisive.

AUD/USD Daily chart

Key Events Ahead

US CPI remains the primary near-term driver for AUD/USD, with inflation surprises capable of shifting rate expectations quickly. In addition, markets will be watching developments around US trade policy and legal rulings tied to Trump’s reciprocal tariff framework.

For now, easing Fed-related uncertainty and resilient Australian demand leave the near-term balance modestly supportive for the Aussie, though confirmation will depend on how price behaves at the edges of the newly formed range.