AUD/USD rises as diminishing expectations for a Federal Reserve rate hike maintain pressure on the US Dollar. Trump’s refusal to renew the Iran deal and naval blockades heighten global geopolitical tensions. Markets are poised for the release of this week’s Australian consumer confidence figures alongside the second-quarter wage price index data. AUD/USD continues to rise for the third day in a row, trading at 0.7110 on Tuesday during Asian trading. The currency pair continues to appreciate as the US Dollar remains subdued amid fading expectations for further rate hikes by the Federal Reserve. The market’s expectation of an interest rate increase next month has considerably decreased as a result of last week’s low consumer price inflation data and a recent, unexpected dip in July US nonfarm payrolls. Consequently, expectations for a Fed rate hike at the upcoming policy meeting have decreased to 35%, down from 47% a month prior, as indicated by the CME FedWatch Tool.
Geopolitical tensions between the US and Iran are influencing market dynamics in the wake of statements from both parties on Monday. US President Donald Trump declared his disinterest in renewing the expiring agreement with Iran, pointing to the ongoing naval blockade of Iranian ports as a demonstration of Washington’s leverage. He reiterated his proposal to designate the critical waterway as US territory under complete American control. Moreover, Iranian Foreign Ministry spokesman Esmail Baghaei asserted that an agreement remains elusive due to security complexities and the “obstructionist behavior of destructive elements,” demanding that the US first lift its blockade. Meanwhile, economic focus in Australia shifts to forthcoming data releases that may impact the market outlook. The domestic docket includes the Westpac Consumer Confidence index for August, with the second-quarter Wage Price Index to follow closely thereafter. Australian wage growth is anticipated to increase by 0.8% on a quarter-on-quarter basis, aligning with the growth rate observed in the previous quarter.
Strategists note that upcoming labour market releases are not expected to materially alter the policy outlook. BBH highlights that the “Australia Q2 wage price index (Wednesday) and July labor force survey (Thursday) are unlikely to shift the dial on RBA rate pricing,” with wages forecast to “rise 0.8% q/q for a third straight quarter and dip to 3.2% y/y vs. 3.3% in Q1.” In their view, this profile reinforces the current market assumption that the RBA is likely to remain on hold, with only limited repricing risk around these data prints. Strategists note that “RBA cash rate futures imply 60% odds of one final 25bps hike by year end to 4.60%.” However, they argue that “the risk is skewed towards a more extended pause in the RBA tightening cycle because policy is already somewhat restrictive,” suggesting markets may be overestimating the likelihood of further near-term moves from the central bank.
AUD/USD trades at 0.7110, maintaining a constructive bullish tone as the spot remains above both the nine-period and 50-period Exponential Moving Averages. The short-term EMA is positioned above the longer one, indicating a favourable near-term trend structure. Meanwhile, the 14-day Relative Strength Index at 65.84 is nearing overbought territory, implying that while upside momentum remains robust, it is also becoming extended. On the downside, immediate support is observed at the nine-period EMA around 0.7074, followed by the 50-period EMA at 0.7028. As long as buyers maintain these support levels, the AUD/USD pair is likely to exhibit an upward bias. However, the high RSI reading suggests that any additional gains from 0.7110 may be subject to consolidation rather than a continuous ascent.
