What's next after cooler Aussie inflation and resilient US jobs halt AUD/USD's rally?

AUD/USD weakens amid easing inflation and stronger US jobs data

AUD/USD ended last week lower at 0.6686, down 0.13%, after reaching a more than 15-month high of 0.6766 earlier in the week.

The pullback was initially triggered by Australia's November monthly consumer price index (CPI) data, which eased concerns about immediate Reserve Bank of Australia (RBA) interest rate hikes. Headline CPI rose 3.4% year-on-year (YoY), below forecasts of around 3.7%, easing from 3.8% in the prior month, while the trimmed mean, the RBA's preferred gauge, eased to 3.2% YoY from 3.3%.

Although both measures remain above the RBA's 2% – 3% target band, the moderation in November after several hotter prints provided relief, prompting markets to temper expectations for an aggressive RBA tightening cycle in 2026.

Also contributing to the Australian dollar's retreat was the US dollar finding support late last week after the December US non-farm payrolls report was not as disappointing as feared. Non-farm payrolls rose by 50,000, softer than expected but not disastrous, and the unemployment rate fell to 4.4% from 4.5%, better than the 4.6% forecast.

This virtually eliminated all expectations of a Federal Reserve (Fed) rate cut at the late-January Federal Open Market Committee (FOMC) meeting, lending support to the US dollar.

Outlook for AUD/USD

Looking ahead, whether AUD/USD extends its correction from the 0.6766 peak this week will depend on risk sentiment over the coming days. Key catalysts include major US bank earnings from Bank of America, Citigroup, Wells Fargo, Morgan Stanley, and Goldman Sachs, along with US producer price index (PPI) and retail sales data, which could influence Fed expectations and broader risk appetite.

AUD/USD technical analysis

The retreat from the overnight 0.6727 high has left a potential head and shoulders topping pattern in AUD/USD.

While head and shoulders topping patterns aren’t typically significant, this one is notable because it is forming against multi-month trend channel resistance in the 0.6750 – 0.6770 area.

If AUD/USD now sees a sustained break of the neckline of the head and shoulders at approximately 0.6665 – 0.6660, it would indicate that AUD/USD has formed a medium-term top at last week’s 0.6766 high. Such a breakdown would project an initial move lower towards support in the 0.6550 – 0.6590 range.

AUD/USD daily candlestick chart

• _{Source: TradingView. The figures stated are as of 14 January 2026 Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}