AUD/USD eyes key jobs data as Middle East tensions lift oil and rate hike expectations

AUD/USD rises as softer US inflation weighs on the dollar

AUD/USD finished higher last week at 0.6981 (+0.42%), locking in a third straight week of gains that included a four-week high of 0.7021.

The rally was driven by softer-than-expected United States (US) consumer price index (CPI) and producer price index (PPI) reports for June, which eased fears of imminent Federal Reserve (Fed) rate hikes. This weighed on US yields, providing increased yield support for the Aussie over the US dollar as viewed in the chart immediately below.

AUD/USD vs AU10YR-US10YR spread chart

The softer inflation data also weighed on the US dollar, providing support for precious and industrial metals such as gold, silver, copper and iron ore, adding another tailwind for AUD/USD.

Oil surge revives hawkish rate expectations

This week, renewed escalation in the Middle East has pushed crude oil to fresh five-week highs. As a result, the US interest rates market has almost fully unwound the dovish repricing that followed last week's softer inflation reports.

With little in the way of tier-one US economic data before next week's Federal Open Market Committee (FOMC) meeting, and the Fed now in its blackout period, the continued rise in oil prices is increasing the risk of a hawkish surprise. Markets are currently pricing in around 50 basis points (bp) of Fed tightening by April 2027, including roughly a 25% probability of a 25 bp rate hike at next week's meeting.

On the Australian side, higher oil prices are also feeding expectations of a more hawkish Reserve Bank of Australia (RBA). Markets are pricing in a 25% chance of an August rate hike and around an 80% chance of a 25 bp increase before year-end.

This comes ahead of a critical week for Australian economic data, beginning with tomorrow's June labour force report and followed next Wednesday by second quarter (Q2) CPI data. Both releases are key inputs for the RBA ahead of its 11 August meeting.

AU: labour force (June)

Date: Thursday, 23 July at 11.30am AEST

May's employment report delivered a stronger-than-expected outcome, with the number of employed people rising by 40,300 – comfortably above the +30,000 consensus forecast. (This followed a sharp revised fall of 40,700 jobs in April.) At the same time, the unemployment rate eased to 4.4% from 4.5%, while the participation rate edged higher to 66.7%.

Looking ahead to tomorrow's June update, consensus expects an increase of 15,000 jobs, with the unemployment rate expected to remain steady at 4.4% and the participation rate unchanged at 66.7%.

A softer-than-expected result – particularly a rise in the jobless rate toward 4.6% – would suggest the RBA has tightened enough. Conversely, a strong jobs report would add to tightening risks.

Australian unemployment rate chart

AUD/USD technical analysis

In our last AUD/USD update here on 7 July we said:

'Looking ahead, provided the AUD/USD continues to hold above the band of support in the 0.6860 – 0.6830 area – which includes last week's low at 0.6863, the March low at 0.6831, and the 200-day moving average currently near 0.6868, there is scope for the pair to extend its recovery – initially back towards the 0.7000 handle.'

Having reached the 0.7000c rebound target, we now see the risks for AUD/USD as more evenly balanced. On the topside, we see medium-term resistance at 0.7080 - 0.7100ish while on the downside the 200-day moving average at 0.6892 will offer solid support as will the March 0.6831 low.

AUD/USD daily candlestick chart

• _{Source: TradingView. The figures stated are as of 22 July 2026 Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}