The Australian Dollar (AUD) advanced for the third consecutive day, rising more than 0.17% against the US Dollar, with the AUD/USD pair trading at 0.7176, up from 0.7159. This rally occurred despite renewed hawkish sentiment toward the US Federal Reserve following the latest US inflation data. The US Core PCE, the Fed’s preferred inflation gauge, increased by 3.3% year-over-year in July, matching expectations and remaining unchanged from the previous month. The headline PCE also held steady at 3.7% year-over-year, slightly above forecasts for a dip to 3.6% [1].
Following the US data, investors priced in an above-70% chance of a Federal Reserve rate hike by the December 2026 meeting. The US Dollar Index (DXY) rose 0.23% to 99.13, and the 10-year US Treasury yield ended Wednesday’s session at 4.649%, up over two and a half basis points. US GDP for Q2 2026 expanded by 1.5% year-over-year, in line with expectations, while July Durable Goods Orders showed solid growth, particularly in transportation [1].
In Australia, the trimmed mean inflation for July exceeded estimates at 0.5% month-over-month, increasing the likelihood of another rate hike by the Reserve Bank of Australia (RBA). RBA meeting minutes indicated that the board discussed a potential rate hike. The swaps market reflected a 43% probability of an RBA rate hike at the September 29 meeting, and traders priced in 25 basis points of tightening by December [1].
Looking ahead, market participants are focused on upcoming Australian economic data, including Q2 Private Capital Expenditure and the RBA’s second-quarter bulletin. In the US, attention turns to Fed Chair Kevin Warsh’s speech at Jackson Hole on Friday and another jobless claims report on Thursday [1].
From a technical perspective, AUD/USD trades at 0.7183, well above its 50-, 100-, and 200-day Simple Moving Averages clustered around 0.7006, reinforcing a bullish near-term outlook. The Relative Strength Index (RSI) near 68 suggests strong but stretched momentum, indicating potential for consolidation or a corrective pause before further gains. Immediate support is seen at 0.7183, with deeper support at 0.7087 and 0.7086, while the next resistance is at the legacy trend line from 0.8015 [1].
CONCLUSION
The Australian Dollar's rally is being driven by expectations of further RBA tightening, which are offsetting renewed hawkishness from the US Federal Reserve. Market sentiment remains cautiously bullish for the AUD/USD pair, though technical indicators suggest the rally may be due for a pause. Investors are closely watching upcoming economic data and central bank communications for further direction.