The Australian Dollar (AUD) is trading near two-month highs at 0.7088 against the US Dollar (USD), buoyed by a weakening greenback and anticipation ahead of the Reserve Bank of Australia’s (RBA) upcoming monetary policy decision scheduled for Tuesday [1]. The AUD has benefited from diminished expectations of further Federal Reserve (Fed) rate hikes, as recent US labor data disappointed market forecasts. Specifically, the US Bureau of Labor Statistics reported a 23,000 decline in net employment for July, missing expectations of an 80,000 increase, and revised the previous two months' job gains sharply lower. This has led futures markets to reduce the probability of a Fed rate hike in September to 44%, down from 67% the previous week [1].
Market participants widely expect the RBA to keep its benchmark interest rate unchanged at 4.35%. The focus is now on the policy statement and Governor Bullock's press release for clues about the likelihood of further rate hikes in the coming months. Recent inflation data showed the RBA Trimmed Mean CPI accelerated to a 3.6% yearly rate in June, up from 3.5% in May but below market expectations of 3.7%. This has cast some doubt on the RBA’s incentive to tighten monetary policy further, especially after three rate hikes already in 2026 [1].
Technical analysis from Societe Generale notes that AUD/USD has defended the 200-day moving average (currently near 0.6920) and has formed a series of higher highs and higher lows, indicating a short-term uptrend. Analysts suggest the next resistance levels could be at 0.7120 and the June highs near 0.7200/0.7275, while the 200-DMA may act as important support [1].
Overall, the market is cautious, with investors refraining from large directional bets ahead of the RBA decision. The interplay between US economic data and RBA policy outlook is likely to drive AUD/USD in the near term [1].
CONCLUSION
The Australian Dollar is trading near two-month highs, supported by a weaker US Dollar and cautious optimism ahead of the RBA’s policy decision. While the RBA is expected to hold rates steady, market participants are closely watching for signals on future policy moves. The outcome of the RBA meeting and subsequent statements will be key in determining the next direction for AUD/USD.