AUD/USD edges higher to approximately 0.7135 in Friday’s Asian session. Traders continue to express concerns regarding the increasing US debt, which poses a threat to the stability of the US Dollar. The RBA encounters increasing pressure to halt rate hikes as unemployment experiences another uptick. The AUD/USD pair is experiencing upward momentum, approaching 0.7135 during the Asian trading hours on Friday. The US Dollar weakens against the Australian Dollar and is poised for a weekly loss as traders perceive the US Treasury’s bond buyback strategy as merely a temporary solution. The preliminary readings of the US Purchasing Managers Index are scheduled for release later on Friday. US Treasury Secretary Scott Bessent stated on Thursday that the Treasury might elevate bond buybacks beyond $4 billion, in part to indicate that prevailing yields do not accurately represent the underlying economic fundamentals. He emphasised that interest rates are unrelated to the decision regarding buybacks. This action followed the department’s announcement to double the size of buybacks on longer-dated securities in the upcoming quarter, aiming to mitigate a significant increase in yields.
The Greenback has declined following these headlines as markets became increasingly cautious regarding the deteriorating fiscal landscape and concerns about the credibility of US institutions reemerged. Conversely, underwhelming Australian labour data could limit the potential gains for the pair. The Australian Bureau of Statistics disclosed on Thursday that employment experienced an unanticipated decline of 15,800 jobs in July. This figure came in weaker than the market expectations of 15,000 gains, resulting in an increase in the Unemployment Rate to 4.5%. “The rise in unemployment marginally strengthens the case for the RBA to hold, particularly given broader signs of weakness in the economy,” said Nerida Conisbee. Analysts highlight a further cooling in Australia’s employment backdrop, noting that the July 2026 Labour Force Survey “showed a softer labor market with the unemployment rate edging up to 4.5% from 4.4%.” This modest deterioration in job conditions, alongside earlier evidence of weaker participation and hours worked, reinforces concerns that the labour market is losing momentum just as gross federal debt climbs above AU$1tn and interest costs are projected to rise steadily toward 2030.
Fed’s Musalem delivered a speech that aligns with the established baseline, with a 7/10 FXS Speechtracker score matching the historical average and signalling a steady, moderately hawkish stance. Emphasis on robust growth, supportive financial conditions, and persistent underlying inflation in the range of 2.5%-3% highlights the potential for upside inflation risks. This is particularly relevant as Musalem underscores the importance of Fed credibility and the necessity for policy independence from fiscal pressures, suggesting that raising rates now could prevent the need for more drastic measures in the future. The recognition of possible new supply shocks, including a “super El Nino,” alongside the phenomenon of crowded-out credit in certain sectors of the economy, introduces a risk-conscious perspective that moderates the hawkish inclination while still favouring pre-emptive tightening over complacency. The FXS Fed Sentiment Index decreased by 0.34 points to 132.42, reflecting a slight reduction in perceived hawkishness while still maintaining a strong position above the neutral threshold of 100. This configuration suggests that, despite a slight softening in tone, the Fed narrative remains in hawkish territory, with Musalem’s remarks reinforcing a bias toward further tightening if inflation fails to converge convincingly toward the 2% target.
In the daily chart, AUD/USD exhibits a bullish near-term bias as the price remains above the 100-day simple moving average and the Bollinger middle band. The pair is pressing toward the upper Bollinger band, signalling an upside extension of the recent advance, while the Relative Strength Index (14) at 65.95 hovers just below overbought territory, indicating that bullish momentum remains robust yet increasingly extended. On the topside, initial resistance is positioned at the upper Bollinger band near 0.7150, where buyers may exhibit caution following the recent rally. On the downside, immediate support is observed at the 100-day SMA around 0.7070, followed by the Bollinger middle band near 0.7055, with a more substantial cushion at the lower Bollinger band around 0.6958 should a broader corrective phase materialise.
