Aussie dollar resilient as precious metals rally and China data offer support

Fed influences and US market dynamics

AUD/USD finished lower last week at 0.6683, marking a modest decline for the third consecutive week.

The Australian dollar's retreat last week came as markets repriced for a less dovish Federal Reserve (Fed) after President Trump indicated a preference to retain Kevin Hassett in his role as director of the National Economic Council, rather than nominate him for Fed chair. This tempered expectations for a more accommodative Fed.

However, AUD/USD has shown resilience at the start of this week, bouncing back above 0.6690 despite risk-off flows pressuring global equity markets, triggered by President Trump threatening 10% tariffs on several European North Atlantic Treaty Organization (NATO) allies unless the United States (US) is granted permission to purchase Greenland.

Impact of precious metals and China’s economic data

This threat has sparked US dollar selling as investors weigh potential disruptions to NATO alliances and trade agreements established last year. It has indirectly benefitted AUD/USD as precious metals hit fresh record highs upon their reopening this morning.

China's latest economic data has also provided support for AUD/USD as fourth quarter (Q4) 2025 GDP grew 4.5% year-on-year (YoY), slowing from the third quarter's (Q3) 4.8% pace but above the 4.4% expected. For the full year, growth was 5.0%, meeting Beijing's official target and underscoring resilience in the world's second-largest economy and Australia’s largest trading partner.

Labour force report

Date: Thursday, 22 January at 11.30am AEDT

For November, employment in Australia fell by 21,000 jobs, falling short of the 20,000 gain the market expected. Despite this, the unemployment rate held steady at 4.3%, below the 4.4% expected, largely due to a dip in the participation rate to 66.7% from October's 66.9%.

While monthly labour force data can be volatile and subject to noise, the November labour force report aligns with other indicators, such as easing job vacancies and slower wage growth, suggesting gradually increasing spare capacity in the labour market.

The Reserve Bank of Australia (RBA) faces a delicate balancing act in 2026, in pursuing its dual mandate of low and stable inflation alongside full employment. With headline inflation pushing above the 2% –3% target band, policymakers will seek to cool price pressures without inducing significant job losses.

December preview: The December 2025 Labour Force Survey is expected to show a rebound in employment, with consensus forecasts pointing to a gain of around 30,000 jobs. The unemployment rate is expected to edge higher to 4.4%, aligning with the RBA's quarterly forecast for the remainder of this year and next year.

This week’s jobs data, alongside the Q4 inflation report due next week, will be pivotal in shaping the outcome of the RBA’s 3 February board meeting. Ahead of this meeting, the Australian interest rate market is pricing in 6 basis points (bp) of RBA rate hikes for February. Pricing for a first full 25 bp hike has been pushed back to August and there is a cumulative 33 bp of RBA rate hikes priced between now and the end of 2026.

AU unemployment rate chart

AUD/USD technical analysis

The retreat from last Tuesday’s 0.6727 high has left a potential head and shoulders topping pattern in AUD/USD. While we aren’t huge fans of head and shoulders topping patterns, this one is more notable for the reason it is tracing out up against multi-month trend channel resistance in the 0.6750 - 0.6770 area.

If AUD/USD were to see a sustained break of the neckline of the head and shoulders at approximately 0.6665 - 0.6660, it would warn 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.

Until then, we will give the uptrend room to reassert itself, starting with a test of the year-to-date high at 0.6766, before a push to 0.6850 - 0.6870.

AUD/USD daily candlestick chart

• _{Source: TradingView. The figures stated are as of 19 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.}