Australian Dollar Faces Pivotal Week as RBA-Fed Rate Divergence Signals Potential Strength Against USD

The AUD/USD currency pair is trading near its strongest levels in over three months, hovering around 0.6640 as markets brace for critical policy announcements from both Australian and US central banks. This technical positioning sets the stage for interesting AUD to USD prediction opportunities this week, with currency traders weighing contrasting monetary policy trajectories between the two economies.

Policy Divergence Creating Favorable Conditions for AUD/USD

The fundamental backdrop reveals a sharp contrast between the Reserve Bank of Australia and the Federal Reserve. Australia’s central bank is widely anticipated to maintain its current stance on Tuesday, as RBA leadership continues signaling the need for cautious policy given persistent inflation concerns. Governor Michele Bullock recently reaffirmed that price pressures remain above the bank’s 2-3% target band, complicating any near-term pivot toward rate cuts.

Conversely, the US Federal Reserve faces mounting pressure to ease monetary conditions. Market pricing from the CME Group’s FedWatch Tool indicates traders see approximately 90% odds of a 25-basis-point rate reduction at Wednesday’s decision. This scenario—with the RBA holding firm while the Fed cuts—creates a structural advantage for the Australian Dollar relative to its US counterpart.

Adding to the divergence narrative, Australia’s economy has demonstrated resilience, recording its quickest annual expansion in two years. Combined with strength in the labor market, this economic resilience positions the RBA as potentially holding rates steady or even tightening in 2025, further contrasting with Fed easing expectations.

China Trade Data and Technical Positioning

Monday’s release of China’s Trade Balance figure represents a key catalyst for near-term AUD/USD direction. As a major trading partner to Australia, Chinese economic health directly influences demand for Australian commodities and the broader outlook for the currency pair.

The pair’s consolidation near September highs suggests bulls maintain structural control of the technical picture. Any meaningful pullback from current levels would likely attract fresh buying interest rather than triggering sustained declines. This dynamic supports the scenario where corrections appear temporary rather than trend-reversing.

What’s Ahead for AUD to USD Prediction

The week’s central event—the Fed’s policy decision and Powell’s subsequent commentary—will likely dominate price action once Asia-Pacific markets hand off to Western trading sessions. Until that catalyst emerges, the Australian Dollar appears anchored to positive fundamental conditions created by the RBA-Fed rate divergence, leaving upside bias intact for AUD/USD over the medium term.