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Australian Dollar weakens as safe-haven demand lifts US Dollar

  • AUD/USD holds losses as US Dollar safe-haven demand rises amid heightened US-Iran tensions and Strait of Hormuz risks.
  • A surprising decline of 23,000 Nonfarm Payrolls in July curbed hopes for an immediate interest rate increase by the Fed.
  • RBA is widely expected to keep its cash rate unchanged at 4.35% on Tuesday.

AUD/USD inches lower after registering modest gains in the previous day, trading around 0.7060 during the Asian hours on Monday. The pair holds losses as the US Dollar (USD) receives support from broad risk aversion.

Geopolitical tensions remain high as the ongoing United States (US)-Iran conflict enters a critical diplomatic phase, with intense military engagements and strategic pressure surrounding the Strait of Hormuz driving market caution. Although Iranian officials noted on Sunday that Oman-mediated negotiations regarding the management of the strait are making progress, safe-haven demand for the Greenback remains firmly intact.

Weaker-than-expected US employment data has dampened expectations for a near-term Federal Reserve (Fed) rate hike. Nonfarm Payrolls (NFP) unexpectedly dropped by 23,000 in July, while sharp downward revisions to the previous two months highlighted weakening labor market conditions. Investors are now focused on upcoming inflation reports for further clues on monetary policy.

Traders look ahead to the Reserve Bank of Australia’s (RBA) monetary policy decision on Tuesday. The central bank is widely expected to keep its cash rate unchanged at 4.35% for a second straight meeting. Traders will closely watch the RBA’s updated forecasts and Governor Michele Bullock’s comments for clues on the future policy path.

Rabo sees November RBA risk keeping modest upside bias in AUD/USD

Strategists at Rabobank note that, in their view, there is still “risk of one more rate hike this year in November,” with markets likely to look to the RBA’s 11 August policy meeting for “more clarity on rate hike risks.” Against this backdrop, the bank says it continues to “forecast a modest upside bias in AUD/USD out to 12 months,” a view it anchors “mostly on the back of a moderately softer tone in the USD and the view that Fed rate hike expectations are overdone.”

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AUD bulls remains on the sidelines as Iran risks support USD ahead of US NFP

  • AUD/USD is seen consolidating on Friday as traders seem hesitant ahead of the US NFP report.
  • Geopolitical uncertainties and Fed hike bets underpin the USD, capping the upside for the pair.
  • Spot prices remain on track to end the week on a flattish note and look to the RBA next week.

The AUD/USD pair steadies around the 0.7030-0.7025 region during the Asian session on Friday as traders opt to wait for the release of the closely watched US monthly employment details before placing fresh directional bets. Nevertheless, spot prices, for now, seem to have stalled the previous day’s retracement slide from the highest level since June 17 and seem poised to end the week on a flattish note amid mixed cues.

The optimism over a potential US-Iran peace deal seems to have faded amid reports Iran is reviewing a plan ‌that would ban US and Israeli vessels from the Strait of Hormuz. According to the initial draft published by Iranian state news agency Fars on Thursday, other nations that have harmed Iran would not be allowed to transit until compensation is paid. This, in turn, prompts traders to price in the geopolitical risk premium, which supports the safe-haven US Dollar (USD) and caps the AUD/USD pair.

Meanwhile, Iran’s Houthi allies in Yemen struck a Saudi tanker in the Red Sea, fueling concerns about energy supply disruptions through another key route. This led to the overnight spike in crude oil prices and revives inflation fears, bolstering bets for a rate hike by the US Federal Reserve (Fed). The outlook remains supportive of elevated US Treasury bond yields, which is seen as another factor acting as a tailwind for the Greenback and keeping the AUD/USD pair depressed for the second consecutive day.

USD bulls, however, seem hesitant and look to the key US Nonfarm Payrolls (NFP) report for more cues about the Fed’s future policy path. The crucial data will play a key role in influencing the near-term USD price dynamics and provide some impetus to the AUD/USD pair. The market attention will then shift to the Reserve Bank of Australia (RBA) policy meeting next week. Apart from this, further developments surrounding the Middle East crisis would help in determining the near-term trajectory for the pair.

Analysts at Standard Chartered expect the RBA to leave the cash rate unchanged at 4.35% at its 11 August meeting, noting that “Q2 trimmed mean inflation held steady at 0.8% q/q – as we had expected – and below the RBA’s prior forecast (0.9%).” They add that this outcome, “together with the recent retracement in oil prices, should take the pressure off the RBA to tighten policy further in the near term.”

Against that backdrop, Standard Chartered says “our base case remains that the RBA is done with rate hikes in the foreseeable future,” although it cautions that “the risk to our view is skewed towards another RBA rate hike in Q4, if the central bank remains unconvinced that demand is slowing sufficiently to contain underlying price pressures.”

AUD/USD daily chart

Chart Analysis AUD/USD

Technical Analysis

The AUD/USD pair is consolidating between its key moving averages, holding above the 200-day Simple Moving Average (SMA) at 0.6923 while remaining capped by the 100-day SMA at 0.7052. This keeps the near-term bias neutral and hints at a range-bound tone rather than a directional breakout.

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AUD holds losses against Japanese Yen following China’s Trade Balance data

  • AUD weakens on safe-haven shift due to geopolitical tensions in the Strait of Hormuz.
  • China’s Trade Balance beat expectations, though moderating export and import growth presents a mixed picture.
  • AUD/JPY could rebound as Japanese Yen retreats despite joint Tokyo-Washington currency intervention efforts.

AUD/JPY halts its three-day winning streak, trading around 111.30 during the Asian hours on Friday. The currency cross depreciates as the Australian Dollar (AUD) loses ground, driven by a surge in global safe-haven demand. Escalating tensions in the Strait of Hormuz have rattled market stability, sparking widespread skepticism over whether this vital shipping route will reopen anytime soon.

Meanwhile, China’s latest trade figures present a mixed economic picture that could carry significant implications for Australia, given the close trading relationship between the two nations. China’s June Trade Balance in US Dollar terms came in at $112.5 billion, topping expectations of $107.0 billion though falling short of the previous $125.62 billion figure. In Chinese Yuan terms, the Trade Surplus widened to 767 billion, beating the estimated 740 billion, but trailing the prior 859.05 billion reading. July exports grew 23.9% year-over-year compared to June’s 27% rise, while imports expanded by 27.5% over the same period, moderating from the previous 36% growth rate.

RBA hike risk keeps modest upside bias in AUD

Rabobank’s FX strategists continue to see scope for further RBA tightening, arguing that “there is still risk of one more rate hike this year in November.” They note that “the market will be hoping that the RBA’s August 11 policy meeting will provide more clarity on rate hike risks,” particularly in light of shifting expectations around the policy path. Against this backdrop, Rabobank maintains “a modest upside bias in Australian Dollar out to 12 months.

Despite these pressures, the AUD/JPY cross could regain traction as the Japanese Yen (JPY) gives back some of its recent gains. Those initial gains were sparked by joint currency intervention from Tokyo and Washington, which has fueled speculation that authorities might step in again.

However, the JPY’s quick retreat highlights ongoing skepticism about whether official intervention can overcome its structural weakness, a weakness continually dragged down by wide interest rate differentials, escalating fiscal concerns, and stubbornly high energy and import costs.

Asian currency slide seen as catalyst for US Dollar intervention

Analysts at ING argue that the recent bout of weakness across key Asian currencies may have been a key trigger for official action in the US Dollar/Japanese Yen pair. They note that “large falls in the Japanese yen, Korean won and Taiwanese dollar might have been one of the reasons the US Treasury stepped in with USD/JPY intervention,” and suggest the move “could be well-timed if the Fed doesn’t hike and the Dollar falls,” potentially aligning policy dynamics with efforts to stabilise the Yen.

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Australian Dollar eases from highs as the impact from Trade Balance figures fade

  • AUD/USD edges down from three-week lows at 0.7064 but maintains its near-term positive bias intact.
  • Australian Trade Balance showed an unexpected surplus in June as commodity exports surged.
  • The US Dollar is failing to find support from macroeconomic data this week.

The Australian Dollar (AUD) posts moderate losses against the US Dollar (USD) on Thursday, retreating to the 0.7040 area from three-week highs at 0.7064 on Wednesday. The pair, however, maintains its near-term bullish structure, with investors biding their time ahead of Friday’s key US Nonfarm payrolls report and awaiting clarity on the US-Iran negotiations.

Data from Australia released on Thursday was supportive, as June’s Trade Balance revealed an unexpected surplus, with commodity exports jumping to four-year highs. Australia’s foreign trade posted an AUD 1.929 million surplus, against expectations of an AUD 1.1 million deficit, and following a downwardly revised deficit of AUD 2.367 million in May.

In the US, on the contrary, the ADP Employment Change disappointed on Wednesday, showing 44K net employment creation in July, less than half of June’s  98K and well below the 70K market consensus. Later on Wednesday, the US ISM Services Purchasing Managers’ Index showed healthy growth, but also short of the market expectations, with prices jumping and employment falling.

Dollar bulls remain capped as markets eye US payrolls

ING’s FX strategists highlight that “news of a deal between Iran and Oman to open a safe shipping route in the Strait of Hormuz has kept the FX market in risk-on mode, favouring a rotation from the Dollar to higher-beta currencies.” However, they stress that “G10 moves have been contained this week, likely because tomorrow’s US payrolls report remains the key catalyst and a notoriously difficult one to predict,” keeping traders wary of aggressive positioning.

ING also points out that “markets are also waiting for the next headlines on US-Iran negotiations.” In their view, “there appears to be little pessimism left in FX markets, and positive headlines on that topic may not generate sustainable USD weakness.” With “payrolls looming tomorrow,” the bank expects that “a wait-and-see stance may keep volatility contained and the Dollar broadly range-bound.”

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Trade of The Day – AUD/JPY

Facts

  • AUDJPY returned today above the 200-day exponential moving average (EMA200; black).
  • Daily RSI[14] fell over the past week from approx. 65 to approx. 34.
  • Interest rates in Australia remain higher than in Japan (4.35% vs. 1.00%).

Recommendation

  • Position: Long (BUY) on AUDJPY at market price
  • Target Price (Take Profit; TP): 112.575 (TP1), 113.465 (TP2)
  • Stop Loss (SL): 109.620

Source: xStation5

Opinion

Recent currency interventions on the yen and a unified narrative from Japanese and US authorities standing behind the Japanese currency (US Treasury Secretary Bessent today: “The United States will do everything in its power to support the yen”) led to a sharp sell-off in JPY-led pairs (AUDJPY: -3.5%, USDJPY: -3.9%, EURJPY: -2.6% change over the past week). The determination communicated by Tokyo and Washington should limit speculative selling of the yen; however, a sustained recovery in the Japanese currency will likely only be possible following stabilization in the bond market and a clear hawkish turn by the Bank of Japan. With current interest rates (Australia: 4.35%, Japan: 1.00%), the recent AUDJPY sell-off enhances the appeal of the carry trade, even in light of recent, fairly dovish remarks from the RBA. A rebound off the 200-day EMA (black), combined with a global increase in risk appetite (gains in risk assets, falling oil prices, de-escalation in the Middle East), should therefore motivate at least a local upward correction in AUDJPY. This is further supported by the fact that AUDUSD itself remains in an uptrend (trading above the EMA30 and EMA100 on the daily interval), bolstered by the recent decline in US rate hike expectations.

Methodology

This recommendation was prepared based on a technical analysis of the AUDJPY chart and a fundamental analysis of the respective economies (monetary policy in Japan, Australia, and the US). The directional bias was determined using moving averages and market expectations regarding central bank policies. Take Profit and Stop Loss levels were established using Fibonacci retracements and price action:

  • TP1 is set at the 38.2% Fibonacci level.
  • TP2 is set at the 23.6% Fibonacci level.
  • SL is placed between the 100% and 78.6% Fibonacci levels, slightly below the EMA200.
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AUD/JPY Rebounds above 110.50, but remains capped below key resistance

  • AUD/JPY attracts some buyers to around 110.70 in Tuesday’s early European session. 
  • The cross keeps a negative tone below the 100-day SMA, with bearish RSI momentum. 
  • The initial support level is seen at 110.40; the first upside barrier is located at 112.85. 

The AUD/JPY cross trades in positive territory near 110.70, snapping the six-day losing streak, during the early European trading hours on Tuesday. However, the potential upside for the cross might be limited due to the coordinated intervention between the United States (US) and Japan, which could provide some support to the Japanese Yen (JPY) against the Australian Dollar (AUD). 

“The view that FX intervention cannot have a lasting impact and merely alters short-term market flows seems right in many cases. However, depending on the circumstances and broader context, intervention can exert a significant influence on the market and trigger an inflection,” said Bank of America analyst Shusuke Yamada.

Japan and US step in to stabilise Yen after historic slide

Strategists at BNY note that Japan’s finance ministry and the US Treasury have “intervened in the foreign exchange market to support the yen” after the currency weakened to its lowest level against the Dollar since 1986. Japanese Finance Minister Satsuki Katayama is cited as saying the joint action was aimed at “countering excessive volatility and disorderly movements in recent months,” underscoring that Tokyo “would not hesitate to carry out further joint intervention if needed.” BNY concludes that the authorities have made it clear they “remain ready to defend the currency” should renewed pressure on JPY emerge.

Chart Analysis AUD/JPY

Technical Analysis:

In the daily chart, AUD/JPY extends a corrective move below the 100-day simple moving average (SMA) and the Bollinger Bands 20-day middle band, which form a dense overhead supply zone. The pair is now drifting toward the lower Bollinger band support, while the Relative Strength Index (RSI) at 34.33 hovers just above oversold territory, hinting that bearish momentum remains in control but could be nearing exhaustion.

On the downside, immediate support is located at the lower Bollinger band near 110.40, where a pause or bounce could emerge if sellers take profits. The next contention level to watch is the 110.00 psychological level, followed by the August 3 low of 109.24. 

On the topside, initial resistance is seen at the 100-day SMA at 112.85, followed by the Bollinger Bands middle band at 113.00; a daily close above these clustered barriers would be needed to ease the current bearish bias and open the way toward the upper Bollinger band near 115.62.

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Australian Dollar gains as strong Job Ads, resurgent inflation signal hawkish RBA

  • Australia’s ANZ–Indeed Job Ads rose 2.0% in July, showing broad-based strength across states and industries.
  • The TD-MI Inflation Gauge jumped 1.0% in July, marking its first increase since April.
  • RBA Governor Bullock warned high underlying inflation could rise further, delaying prospective policy easing.

AUD/USD rises after two days of losses, hovering around 0.7010 during the Asian hours on Tuesday. The Australian Dollar (AUD) gained ground following the release of positive employment data, which showed that ANZ–Indeed Job Ads increased by 2.0% month-over-month in July. This rebound reversed a 0.2% decline from the previous month, marking the fourth monthly rise of the year. According to ANZ Senior Economist Catherine Birch, the growth was broad-based across both states and industries, reflecting robust labor demand even as the overall economy cools.

Meanwhile, renewed inflationary pressures are further supporting expectations of a cautious stance by the central bank. Data released on Monday showed the TD-MI Inflation Gauge rising 1.0% month-on-month in July, recovering from a 0.4% drop in June and marking its first gain since April. This uptick aligns with the Reserve Bank of Australia’s (RBA) June Meeting Minutes, which projected that underlying price pressures would intensify mid-year.

RBA Governor Michele Bullock recently emphasized that underlying inflation remains too high and warned of potential further increases driven by higher oil prices stemming from the conflict in Iran, strengthening the case for the RBA to hold off on policy easing.

RBA flags persistent inflation and resilient jobs market

BNY’s Geoff Yu notes that RBA Assistant Governor Sarah Hunter acknowledged that “inflation remains above the 2-3% target band” and stressed the central bank must “keep pressure on price growth so higher inflation expectations do not become entrenched.” On the labour market, Hunter judged that conditions are “still somewhat tight,” with job growth having held up “not too badly” over the first half of the year, underscoring ongoing resilience in employment despite softer headline price dynamics.

The AUD/USD pair gains ground as the US Dollar (USD) struggles on easing geopolitical tensions amid lingering hopes for a diplomatic breakthrough between the United States (US) and Iran. US President Donald Trump announced that his latest offer of talks is a “last chance” for Iran, following his decision to call off a major attack on the Islamic Republic. Trump expressed expectations that negotiations would begin shortly to reopen the Strait of Hormuz and address US concerns regarding Iran’s nuclear program.

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Australian Dollar remains stronger following China’s RatingDog Manufacturing PMI data

  • The Australian Dollar remains strong despite China’s manufacturing PMI easing to 50.9 in July.
  • The US Dollar faces pressure following Japan’s $58.97 billion yen-buying intervention and easing risk aversion.
  • US-Iran diplomatic claims remain contested, keeping market sentiment cautious as Iranian forces stay on high alert.

AUD/USD depreciates after opening at a bullish gap, remaining in the positive territory and trading around 0.7030 during the Asian hours on Monday. The currency pair maintains its gains as the Australian Dollar (AUD) remained resilient, supported by economic developments in China, Australia’s major trading partner.

China’s RatingDog Manufacturing Purchasing Managers’ Index (PMI) eased to 50.9 in July from 51.7 in June, missing market expectations of 51.5; it continued to signal expansion in manufacturing activity.

Aussie inflation surprise seen as fuel-driven but still above RBA target

BNY’s Geoff Yu notes that RBA Assistant Governor Sarah Hunter characterised Australia’s latest CPI print as “a touch softer” than anticipated, with the downside surprise in headline inflation “mainly driven by lower fuel prices.” Hunter’s comments underscore that the moderation in price pressures is narrowly focused, rather than signalling a broader disinflation trend, and come against the backdrop of inflation still running above the RBA’s 2–3% target band.

The US Dollar (USD) struggles against major peers following official confirmation from Japan regarding joint currency interventions. Japanese authorities confirmed they carried out coordinated yen-buying operations with the United States, with Bank of Japan data pointing to spending of up to $58.97 billion on Thursday. Tokyo further signaled its readiness to intervene again if necessary, noting that close communication with US counterparts remains ongoing.

Pressure on the Greenback was further compounded by a broader easing of market risk aversion, spurred by potential diplomatic developments between the US and Iran. Sentiments shifted after reports indicated US President Donald Trump paused planned military strikes. In a post on Truth Social, President Trump stated that Iran and neighboring Middle Eastern nations had requested time to finalize a deal, a proposal that would lead to the complete reopening of the Strait of Hormuz and address Iran’s nuclear program.

However, financial markets remain cautious as Iranian officials swiftly contested these claims. Reporting via Iran’s Mehr news agency, officials characterized the assertion that Tehran sought a pause as “nothing but a new lie.” They emphasized that Iranian military forces remain on high alert and fully prepared for any eventuality, keeping geopolitical uncertainty elevated.