• Strong Q2 GDP boosts expectations for an RBA rate hike, with November fully priced in.
• Fed Waller’s dovish remarks drop September US rate hike odds to 50.2%.
• Traders await US Nonfarm Payrolls, expected to add 56,000 jobs with 4.1% Unemployment.

AUD/USD extends its gains for the third successive day, trading around 0.7210 during the Asian hours on Friday. The currency pair is gaining upward momentum as the Australian Dollar (AUD) finds firm support in robust economic growth data, which has heightened expectations of an imminent interest rate hike.

Australia’s economy proved surprisingly resilient in the second quarter, reinforcing the belief that the Reserve Bank of Australia (RBA) may resume monetary tightening following three rate increases earlier this year. Consequently, market probabilities for a rate hike this month rose to 58% from 49% before the GDP release, with a rate adjustment to 4.60% now fully priced in for November.

Australia trade surplus narrows as June data revised higher

Rabobank notes that the July trade figures for Australia, released on Thursday, showed a “small but expected reduction in the monthly trade surplus,” accompanied by “an upward revision to June’s figure.” The bank highlights that the combination of a modestly narrower surplus in July and stronger revised data for June will be closely watched for what it implies about the trajectory of Australia’s external balances.

Conversely, the US Dollar (USD) faces pressure after Federal Reserve Governor Christopher Waller indicated a preference for holding interest rates steady at the upcoming September meeting, assuming upcoming inflation data delivers no major surprises. Waller’s dovish comments provided a notable contrast to the hawkish tone set by Chairman Kevin Warsh the previous week. Following these remarks, the CME FedWatch tool showed the market-implied probability of a Fed rate hike in September dropping to 50.2%, down sharply from 63.2% just a day earlier.

Market participants are now turning their attention to the upcoming release of the US August employment report for further directional cues. Current projections estimate that Nonfarm Payrolls (NFP) will increase by 56,000, while the Unemployment Rate is expected to hold steady at 4.1%.

Technical Analysis: AUD/USD holds above moving averages

In the daily chart, AUD/USD trades at 0.7212, maintaining a constructive bullish tone as it holds above both the nine-period and 50-period Exponential Moving Averages (EMAs). The alignment of the shorter EMA above the longer one suggests a sustained upward bias, while the 14-day Relative Strength Index (RSI) near 67 keeps the pair in positive territory without yet signaling extreme overbought conditions, hinting that upside momentum remains intact for now.

On the downside, initial support is seen at the 9-period EMA around 0.7173, with the 50-period EMA near 0.7085 offering a deeper dynamic floor if a corrective pullback develops. Below there, a more distant horizontal support level emerges at 0.6667, which would only come into focus if the current bullish structure meaningfully unwinds.