Key Moments
- Bank of America reiterates a bullish stance on the Australian dollar even after recent moderate local inflation data.
- The bank’s analysis suggests the EUR/AUD downtrend may continue during U.S. hours and would not be considered stretched until 1.70.
- BofA highlights that precious metals strength and option market positioning are supporting AUD, while geopolitical or risk-off shocks remain key risks.
Ongoing Strength in AUD Backed by Options Market
Investing.com – Bank of America is maintaining a constructive outlook on the Australian dollar, pointing out that it was one of the few currencies where option skew moved in favor of calls last week, even as Australian inflation data remained moderate.
EUR/AUD Downtrend Seen Having Further Downside
The bank’s latest analysis, published on January 5, 2026, signals that the current EUR/AUD downtrend could extend further during U.S. trading hours. According to Bank of America, the cross would not be viewed as technically stretched until it reached the 1.70 level.
| Aspect | Bank of America View |
|---|---|
| AUD stance | Maintains a bullish view |
| EUR/AUD direction | Downtrend seen as having more room to fall |
| Level considered stretched | EUR/AUD at 1.70 |
Support from Precious Metals and Quant Models
Bank of America’s Currency and Rates Strategy (CARS) model indicates that the recent ascent in precious metals is adding another layer of support for the Australian dollar.
The bank initially set out its positive AUD stance in its FX Quant Insight report, also dated January 5. Since then, recent price action has further validated this bullish positioning, despite the backdrop of moderate Australian inflation data.
Key Risks to the EUR/AUD View
While the bank remains negative on EUR/AUD, it flags that the main risk to this view would come from a reversal in sentiment toward the Australian dollar. Specifically, Bank of America warns that an AUD selloff could be triggered by geopolitical developments or a broader global equity market risk-off environment.
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