The Australian Dollar (AUD) edged higher on Wednesday, snapping a three-day losing streak, as market sentiment improved following US President Donald Trump’s renewed openness to trade negotiations. The AUD/USD pair is currently trading near 0.6530, rebounding after recent weakness driven by global trade uncertainty and US Dollar strength.
Trump’s Trade Shift Supports Risk Sentiment
President Trump’s recent remarks signaling readiness to re-engage in trade talks with key partners like the EU helped calm fears of a full-blown trade war. Although he also confirmed plans to impose over 10% tariffs on smaller nations in Africa and the Caribbean, markets welcomed his willingness to negotiate, which supported the risk-sensitive Aussie Dollar.
Adding to the AUD’s strength, the latest Westpac-Melbourne Institute Consumer Sentiment Index showed a third consecutive monthly increase, rising 0.6% in July. The consistent uptick in consumer confidence points to improving household sentiment, bolstering expectations for a stronger domestic economy.
All Eyes on Australia’s Jobs Report and RBA Policy
Investors now turn their attention to Thursday’s employment report from the Australian Bureau of Statistics. Markets anticipate an employment gain of 20,000 jobs in June, while the unemployment rate is expected to remain at 4.1%.
Despite this potential positive, expectations remain high for a 25-basis-point rate cut by the Reserve Bank of Australia (RBA) in August. Markets have already priced in up to 75 basis points in cuts by early 2026. However, RBA Governor Michele Bullock has reiterated inflation risks remain, citing persistent labor costs and poor productivity as key upside risks.
US Dollar Steady Ahead of PPI and Fed Outlook
The US Dollar Index (DXY) holds steady near 98.50 as traders await key US economic releases, including June’s Producer Price Index (PPI) and the Fed Beige Book. Recent CPI data revealed a 2.7% annual increase, while core inflation came in at 2.9%—still well above the Fed’s 2% target.
Fed officials, including Dallas Fed President Lorie Logan, have stressed the need to maintain elevated rates in the near term, particularly amid upward inflationary pressure from Trump’s tariff policies.
Meanwhile, Trump confirmed his openness to appointing Scott Bessent as the next Fed Chair, but noted he’s pleased with Bessent’s current performance as Treasury Secretary. Geopolitical risks also linger, with Trump threatening steep tariffs on Russia if a peace deal isn’t reached and confirming additional US weapon shipments to Ukraine.
AUD/USD Technical Outlook: Retesting Key Support Levels
Technically, AUD/USD is trading around the 0.6530 level, slightly below the nine-day Exponential Moving Average (EMA) of 0.6541. The pair is consolidating within an ascending channel pattern, and the Relative Strength Index (RSI) stands neutral near 50.
- Upside Potential: A breakout above the 9-day EMA could push the pair toward 0.6595, its eight-month high. A sustained move above this level would reinforce the bullish trend, potentially driving the pair to 0.6700 at the top of the channel.
- Downside Risk: On the flip side, a break below the ascending channel’s lower boundary near 0.6510 could expose the 50-day EMA at 0.6488 and a three-week low around 0.6485.
Outlook
The Australian Dollar is at a critical juncture. Near-term direction hinges on Thursday’s Australian jobs report and US inflation data. With geopolitical and monetary policy developments in play, traders should brace for volatility across AUD/USD in the days ahead.
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