The Australian dollar against the US currency has, for the second week in a row, been trading in the 0.6670–0.6730 range. The Aussie reacts impulsively to the current news flow, but all rallies and declines occur within the specified price corridor. For example, on Monday, traders are pricing in an overall weakening of the greenback amid Trump's intentions to introduce additional tariffs against a number of EU countries and the UK. The AUD/USD pair bounced off the lower boundary of the range and headed toward its upper boundary, i.e., the 0.6730 mark.

Notably, traders in the pair ignored Monday's data on China's economic growth, which, for the most part, was disappointing. As a rule, the Australian dollar reacts sharply to negative signals from China, since China is one of Australia's main trading partners. However, this time, market participants set different priorities — AUD/USD is rising despite the slowdown in the Chinese economy.

Can this rise be trusted? Both yes and no.

On the one hand, the US currency is indeed under fairly strong pressure — the US dollar index on Monday fell into the 98 area, updating a weekly low. Major currency pairs in the "majors" group have reconfigured accordingly. This suggests that AUD/USD can quite plausibly test the upper boundary of the 0.6670–0.6730 corridor.

On the other hand, the prevailing fundamental background does not support a sustainable (that is the key word) rise in AUD/USD. The current weakening of the US dollar is situational and emotional. At least for Monday, there are no objective grounds for forming a sustainable uptrend in AUD/USD. It can be assumed that around the 0.6730 mark, the northward impulse will begin to fade, after which the bears will again seize the initiative in the pair.

The US currency came under pressure on reports that the European Union may apply a so-called "anti?coercion" instrument against the United States in response to Donald Trump's threats to impose tariffs on the EU over Greenland. The Anti-Coercion Instrument allows the EU to counter economic coercion by restricting trade licences and closing access to the single market. This is a fairly serious lever of influence that has not yet been used in practice.

There is no doubt that such EU actions will not go unanswered by the White House. That is, the flywheel of trade confrontation will accelerate rapidly, negatively affecting both the US and the European economies.

However, judging by the latest statements, EU countries will not rush into radical measures. Following the emergency meeting, EU leaders said they want to prioritise dialogue and diplomacy.

It should be noted that the "Greenland case" is the only fundamental factor currently playing against the US currency. All other (the overwhelming majority of) factors are on the greenback's side. CPI/PPI indices, retail sales data, Unemployment Claims, and manufacturing indices — all these reports have strengthened the dollar by weakening dovish expectations about further Fed action. The market is almost 100% certain that the Fed will keep all monetary policy parameters unchanged at the January Fed meeting. Meanwhile, the probability of a rate cut at the March meeting now stands at only 20%.

Thus, if the risks of a "new tariff war" subside, the greenback will again enjoy heightened demand. Accordingly, the AUD/USD pair will again head for the lower boundary of the above range. Moreover, the Australian dollar is currently under pressure after the latest inflation report from Australia.

Briefly recall that the headline consumer price index month-on-month remained at zero in November (as in October), while most analysts had predicted a minimal growth of 0.1%. Year-on-year, the headline CPI came in at 3.4%, versus a forecast of 3.8%. The indicator had been accelerating for four consecutive months but slowed in November, and more than expected.

After this release, market talk that the Reserve Bank of Australia might raise rates this year subsided — the baseline scenario is to remain on the sidelines. Therefore, the AUD/USD pair has effectively become stuck within the above price corridor: current news events are being priced inside this range.

Thus, if the upward impulse begins to fade around the 0.6730 mark, it is reasonable to consider short positions on the pair with targets at 0.6700 (middle line of the Bollinger Bands on D1) and 0.6670 (lower line of the Bollinger Bands on H4).