Australia’s Wage Price Index increased by 3.2% year-on-year in Q2 2026, aligning with expectations even as it reached a multi-quarter low. RBA Deputy Governor Andrew Hauser cautioned that inflation continues to be elevated, necessitating a more stringent monetary policy to temper economic demand. Weak US retail sales and a cooling inflation environment have led to a reduction in the probabilities of a rate hike in September to 35%. AUD/USD continues to decline for the second consecutive day, hovering around 0.7080 during the Asian trading session on Wednesday. In the context of the wider economic landscape, Reserve Bank of Australia Deputy Governor Andrew Hauser highlighted on Wednesday that inflation continues to be at an unacceptably elevated level. Hauser asserted that monetary policy should aim to diminish demand within the economy and alleviate price pressures. While the central bank does not foresee a recession, it is observing a general deceleration and maintains significant concern regarding upside risks to inflation. Hauser cautioned that should inflation not subside, the RBA will be compelled to increase interest rates once more.
Australia’s seasonally adjusted Wage Price Index rose by 3.2% year-on-year in Q2 2026, remaining consistent with the revised figure from Q1 and aligning with market expectations. Quarterly wages increased by 0.8%, consistent with the growth rate observed over the last four quarters; however, the annual figure indicates the slowest wage growth since the fourth quarter of 2024. Analysts maintain that “the risk for AUD is on the upside,” a view they have held since early August and reiterated on 17 August when spot was trading around 0.7080. At that point, they cautioned that “the risk for AUD remains on the upside but note that AUD must surpass 0.7100 before a move to 0.7120 can be expected.” The currency has since “quickly broken above both 0.7100 and 0.7120,” briefly reaching “a high of 0.7129 before retreating,” and UOB now flags “0.7150” as “the next level to monitor.” The bank adds that “only a breach of 0.7070” – with the prior “strong support” noted at 0.7050 – “would mean that the upside risk has faded.”
However, the downside of the AUD/USD pair could be restrained as the US Dollar weakens amid easing expectations of a US interest rate hike next month. Recent economic data indicated a decline in US Retail Sales in July, marking the first decrease in nine months. This development has intensified concerns following unexpected job losses in the previous month and subdued CPI inflation figures. While the Fed maintained its current interest rates at the latest meeting, three officials expressed dissent in support of a rate increase, prompting traders to anticipate the forthcoming minutes for a more nuanced understanding of the internal divisions within the central bank. According to the CME FedWatch tool, traders currently assign a 35% probability to a rate hike at the Fed’s September meeting, a notable decrease from the 47% observed a month prior. In the daily chart, AUD/USD is positioned at 0.7080, maintaining a bullish near-term outlook as the price remains above both the nine-period and 50-period Exponential Moving Averages.
The short-term EMA clustering just beneath price indicates a constructive underlying bid, while the 14-day Relative Strength Index at 58.4 remains in positive territory without yet reaching overbought conditions, suggesting that bulls still have room to extend the advance. The technical analysis of the daily chart indicates that the pair is maintaining its position within the ascending channel, reflecting a persistent bullish bias. On the downside, initial support is observed around the nine-period EMA at 0.7071, followed by the 50-period EMA at 0.7029, where a deeper pullback would test the integrity of the current uptrend; below this, horizontal levels at 0.6833 and 0.6400 establish a more distant structural floor. On the topside, the next significant hurdle emerges at the horizontal resistance at 0.7278. A sustained break above this barrier would pave the way for a continuation of the broader recovery phase in the pair.
