Robust second-quarter GDP figures have heightened anticipations for an interest rate increase by the Reserve Bank of Australia, with the market fully pricing in a move for November. Fed Waller’s dovish remarks have reduced the probability of a September US rate hike to 50.2%. Traders are anticipating the release of US Nonfarm Payrolls, which are projected to reflect an increase of 56,000 jobs alongside an unemployment rate of 4.1%. AUD/USD extends its gains for the third successive day, trading around 0.7210 during the Asian hours on Friday. The currency pair is gaining upward momentum as the Australian Dollar finds firm support in robust economic growth data, which has heightened expectations of an imminent interest rate hike.
Australia’s economy demonstrated unexpected resilience in the second quarter, bolstering the view that the Reserve Bank of Australia might consider resuming monetary tightening after implementing three rate increases earlier this year. Consequently, market probabilities for a rate hike this month increased to 58% from 49% prior to the GDP release, with a rate adjustment to 4.60% now fully incorporated for November. Rabobank notes that the July trade figures for Australia, released on Thursday, showed a “small but expected reduction in the monthly trade surplus,” accompanied by “an upward revision to June’s figure.” The bank highlights that the combination of a modestly narrower surplus in July and stronger revised data for June will be closely watched for what it implies about the trajectory of Australia’s external balances.
Conversely, the US Dollar faces pressure following Federal Reserve Governor Christopher Waller’s indication of a preference for maintaining interest rates at their current level during the forthcoming September meeting, contingent upon the forthcoming inflation data not presenting any significant surprises. Waller’s dovish remarks stood in stark contrast to the hawkish stance articulated by Chairman Kevin Warsh the prior week. Following these remarks, the CME FedWatch tool indicated that the market-implied probability of a Fed rate hike in September decreased to 50.2%, a significant decline from 63.2% just a day prior. Market participants are currently focusing on the impending release of the US August employment report for additional directional insights. Current projections estimate that Nonfarm Payrolls will increase by 56,000, while the Unemployment Rate is expected to hold steady at 4.1%.
In the daily chart, AUD/USD is positioned at 0.7212, sustaining a positive bullish sentiment as it remains above both the nine-period and 50-period Exponential Moving Averages. The alignment of the shorter EMA above the longer one indicates a sustained upward bias, while the 14-day Relative Strength Index near 67 maintains the pair in positive territory without signalling extreme overbought conditions, suggesting that upside momentum remains intact for the time being. On the downside, initial support is identified at the 9-period EMA around 0.7173, while the 50-period EMA near 0.7085 provides a more substantial dynamic floor should a corrective pullback occur. Below there, a more distant horizontal support level emerges at 0.6667, which would only come into focus if the current bullish structure meaningfully unwinds.
