Australian Dollar Climbs as Strong Jobs Data and Fed Cut Bets Boost Sentiment

The Australian Dollar extended its rally for a third straight day on Thursday, gaining ground after stronger-than-expected domestic labor market figures and a weaker US Dollar fueled by growing expectations of US Federal Reserve rate cuts.

Australia’s Labor Market Strengthens in July

Australia’s employment data surprised on the upside, with Employment Change rising by 24.5K in July, up sharply from June’s revised 1K figure and close to the market forecast of 25K. The Unemployment Rate eased from 4.3% to 4.2%, in line with expectations.

The upbeat jobs report provided a boost to the AUD, even as the Reserve Bank of Australia (RBA) recently cut rates by 25 basis points to 3.6% at its August meeting. RBA Governor Michele Bullock maintained a cautious tone, noting that further rate adjustments would be decided on a meeting-by-meeting basis, emphasizing the need to safeguard price stability amid moderating inflation.

Meanwhile, Australia’s Wage Price Index rose 0.8% QoQ in Q2, slightly below the previous quarter’s 0.9%, but the annual figure stood at 3.4%, marginally beating expectations.

US Dollar Weakens on Aggressive Fed Cut Expectations

The US Dollar remains under pressure, with the US Dollar Index (DXY) slipping for a third consecutive session to around 97.70. Markets are now pricing in a 94% chance of a 25-basis-point Fed rate cut in September, with some speculation of a larger 50-bps move.

US Treasury Secretary Scott Bessent added to dovish sentiment, suggesting short-term rates should be 1.5-1.75% lower than the current 4.33% and stating there’s a “good chance” of a 50-bps cut in September. Former President Donald Trump also weighed in, saying rates should be at or near 1%.

Economic data reinforced this view, with July’s CPI rising 2.7% YoY, matching June’s pace and missing the 2.8% forecast. The core CPI climbed to 3.1% YoY, slightly above expectations.

Trade Truce Lifts Risk Sentiment

Global risk appetite improved after the US and China extended their tariff truce by 90 days. China also suspended additional tariffs on US goods during this period. Stronger trade relations with China tend to benefit the AUD due to Australia’s export-dependent economy.

Bessent confirmed that US and Chinese officials will reconvene in the next 2–3 months, but stressed that tariff reductions would require sustained progress on curbing fentanyl flows from China.

AUD/USD Technical Outlook

The AUD/USD is currently trading near 0.6570, holding within an ascending channel pattern and staying above the 9-day Exponential Moving Average (EMA), signaling continued short-term bullish momentum. The 14-day RSI has climbed above 50, reinforcing positive sentiment.

Upside targets: A push through 0.6590 could open the way to the psychological 0.6600 level and the nine-month high at 0.6625.
Downside levels: Initial support lies at the 9-day EMA near 0.6526, followed by the 50-day EMA at 0.6505 and the channel’s lower boundary at 0.6500. A decisive break below this zone could expose 0.6419 and 0.6372.