Australian Dollar Holds Strong on Hawkish RBA Bets as Markets Await Jobs Data

The Australian Dollar is maintaining its upward momentum despite broader greenback strength, buoyed by hawkish policy expectations from the Reserve Bank of Australia. As traders brace for tomorrow’s employment figures, the currency dynamics hinge on whether labour market weakness could undermine the central bank’s increasingly bullish stance on inflation control.

Why Hawkish Central Bank Expectations Support the AUD

The RBA’s recent policy decision struck a decidedly hawkish tone, following a string of inflation readings that exceeded forecasts. The central bank has signalled that a rate increase may become necessary sometime during 2026, a statement that has reverberated through currency markets. Traders are currently pricing in a 29% probability of tightening at the upcoming February meeting, with expectations for 38 basis points of cumulative rate hikes by year-end. This hawkish positioning has provided steady support for the Australian currency.

Tomorrow’s employment report carries outsized significance for AUDUSD, even though RBA officials have flagged next week’s quarterly inflation data as their primary focus. Labour market resilience could reinforce the central bank’s hawkish credentials and keep the AUD bid intact. Conversely, a disappointing jobs figure would likely trigger broader softness across the currency, as it would complicate the case for monetary tightening.

The US Dollar’s Challenge: Greenland Tensions and De-dollarisation Concerns

The greenback has come under sustained pressure this week following geopolitical escalation around Greenland. The primary narrative driving dollar weakness remains the structural de-dollarisation theme, exacerbated by what many perceive as unpredictable US foreign policy. Recent dollar strength had been underpinned by modest hawkish repricing of rate expectations, but the latest diplomatic turbulence has effectively reversed those positioning gains.

Markets will be closely monitoring Davos today for updates on Greenland discussions and any relevant statements from senior US officials. News flow from the World Economic Forum and Trump administration social media posts could prove decisive for near-term direction. Should tensions ease, the dollar could experience a relief rally, particularly if upcoming economic data proves supportive.

AUDUSD Technical Picture: Key Levels and Trading Setups

On the daily timeframe, AUDUSD bounced sharply from the support zone around 0.6665 and erased most of January’s dollar gains. However, the daily chart offers limited tactical clues, making lower timeframes essential for understanding near-term trading dynamics.

The four-hour chart reveals a more informative picture. The recovery from 0.6665 has been swift and pronounced, quickly negating recent bearish momentum. From a risk-management perspective, dip buyers seeking to add positions will find better entry opportunities near the support zone, with protective stops positioned below to target a breakout toward fresh highs. Sellers, meanwhile, will require a decisive break below support to justify a fresh leg down toward the 0.6600 handle.

On the one-hour chart, a minor support zone sits around 0.6725. Should the pair retreat to this level, buyers are likely to defend with tight stops below support as they position for an upside move. The red lines on the chart mark the typical daily range for today’s session, providing additional context for intraday volatility expectations. Bears will need a convincing break below 0.6725 to reset the intermediate-term structure and open the door toward 0.6665 support.

Critical Catalysts This Week: Trump at Davos and Australia’s Employment Report

Today’s agenda centers on Trump’s World Economic Forum appearance in Davos, where Greenland negotiations will likely feature prominently. Additionally, the Fed’s Cook hearing occurs today, adding another layer of potential USD volatility. Keep close watch on official statements and any social media commentary that could roil markets.

Tomorrow brings the Australian employment report alongside US Jobless Claims figures—twin labour market readings that could reshape rate expectations on both sides of the Pacific. The week concludes Friday with US Flash PMI data, rounding out a busy slate of economic indicators.