Summary:
AUD/USD slips below 0.6500 as strong US dollar, global policy expectations, and geopolitical tensions outweigh domestic gains.
The Australian dollar has come under renewed pressure, with AUD/USD extending its decline for a second straight session. The pair traded at 0.6491. edging down from 0.6493 in the previous close, and hitting its lowest level in nearly two weeks. Despite a significant improvement in Australian consumer confidence, the currency failed to find support as external drivers—particularly US dollar strength and central bank expectations—set the tone.
Australia's Westpac Consumer Confidence Index rose sharply in August, climbing 5.7% to 98.5. the strongest reading since February 2022. Analysts attribute the lift in sentiment to the Reserve Bank of Australia's (RBA) cumulative 75 basis points of rate cuts since January. Matthew Hassan, Head of Macroeconomic Forecasting, suggested that persistent pessimism among households may finally be easing, although sustaining this rebound may require additional policy support. Still, there is little immediate pressure on the RBA to act further.
While AUD/USD weakened, the US dollar firmed on the back of geopolitical headlines. President Donald Trump confirmed that preparations are under way for a trilateral summit with Russia and Ukraine, signalling potential progress on security guarantees and territorial negotiations. The US Dollar Index (DXY) held steady near 98.00. reflecting broad dollar resilience against its major counterparts.
Investors now look to the Jackson Hole Economic Policy Symposium, where Federal Reserve Chair Jerome Powell is expected to provide clarity on September's policy direction. Market expectations remain tilted towards further monetary easing, with the CME FedWatch tool showing an 84% chance of a 25-basis-point cut next month. US Treasury Secretary Scott Bessent has gone further, arguing for short-term rates to fall well below current levels.
Adding to volatility, the Trump administration has expanded tariffs on steel and aluminium imports, extending the measures to over 400 new items. The President has also hinted at further action on steel and the possibility of tariffs on semiconductors. At the same time, trade talks between the US and China are expected to resume in the coming months, keeping market participants on alert.
Technically, AUD/USD remains vulnerable. The pair is trading below the nine-day exponential moving average, while the 14-day Relative Strength Index (RSI) stays under 50—signalling bearish bias.
On the downside, the immediate target lies at 0.6419. the two-month low from early August. A break below could see the pair test 0.6372. marking a fresh three-month trough. On the upside, 0.6500 remains a critical resistance level, reinforced by both the 9-day and 50-day moving averages. A successful breakout could push AUD/USD towards 0.6568 and potentially the nine-month high at 0.6625.
Although Australian consumer confidence has shown encouraging signs of recovery, the AUD/USD pair remains under considerable downward pressure. The dominance of US dollar strength, geopolitical uncertainties, and global monetary policy expectations is overshadowing domestic improvements. Unless the pair can regain ground above 0.6500. the balance of risks points towards further declines in the short term.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
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