AUD firms driven primarily by ongoing US dollar softness

Daily Currency Update

Overnight, the Australian dollar (AUD) posted modest gains against the US dollar (USD), rising above the US$0.65 threshold. This uptick was driven primarily by ongoing US dollar softness, as markets continue to price in a likely Federal Reserve rate cut in the coming months. Broader risk-on sentiment and relatively stable commodity prices, particularly in iron ore and energy markets, also supported the AUD’s momentum. Although the move was not substantial, the currency held firm, signalling underlying investor confidence amid growing divergence in global monetary policy expectations.

In the near term, the outlook remains cautiously optimistic. Analysts anticipate modest appreciation, with some forecasts suggesting AUD/USD could reach US$0.6558 within a week, though short-term fluctuations between US$0.6484 and US$0.6558 remain likely. From a technical perspective, the pair is showing signs of a potential bullish trend, with key resistance zones at US$0.6549 to US$0.6567 in focus. If these levels are breached, the pair may push toward recent highs near US$0.6624, provided that critical support around the US$0.6480 level holds.

Looking ahead, the medium-term trajectory of the AUD will be heavily influenced by central bank policy. Australia’s economy has shown signs of resilience, bolstered by robust July employment figures, which could prompt the Reserve Bank of Australia (RBA) to adopt a more cautious stance on future rate cuts. Nonetheless, markets still expect a gradual easing from the RBA through late 2025. The interplay between domestic data, global risk sentiment, and US monetary policy will remain key drivers of the AUD’s direction in the months to come.