Strong GDP and Fed Waller comments lift AUD/USD into the Labor Day weekend

RBA rate hike expectations and dovish Fed commentary support AUD/USD

AUD/USD finished higher last week at 0.7204 (+0.58%), its highest weekly close in four months. The gains were driven by a stronger-than-expected Australian second quarter (Q2) gross domestic product (GDP) report and dovish Federal Reserve (Fed) commentary, while foreign exchange (FX) markets shrugged off a surprisingly robust non-farm payrolls (NFP) report.

At the start of last week, AUD/USD hit an almost two-week low of 0.7119 on risk-aversion flows following the latest flare-up in the Middle East, before stepping back onto the escalator higher midweek.

The rally gathered momentum after the Australian national accounts showed Q2 GDP increased by 0.4% in the June quarter, lifting the annual rate of growth to 2.1% year-on-year (YoY), well above the 1.8% expected.

It was the Australian economy's 19th consecutive quarter without a contraction and, stacked against the previous week's sticky inflation report, saw the Australian interest rate market move to price in a near-100% chance the Reserve Bank of Australia (RBA) will hike rates by 25 basis points (bp) for a fourth time this year by the 3 November Board meeting.

Also fuelling AUD/USD's move higher were surprisingly dovish comments from Fed Governor Christopher Waller, who noted in a speech on Thursday night that recent inflation data had improved and that, if incoming data continued to point in that direction, he would be inclined to hold the federal funds rate at the 16 September meeting.

To top things off, FX traders elected to look through Friday night's robust NFP report, signing off early for the three-day Labor Day weekend and seemingly preferring to wait for this week's US producer price index (PPI) and consumer price index (CPI) reports.

Looking ahead, AUD/USD this week will be heavily influenced by risk sentiment and US inflation data as the latest skirmish in the Middle East pushes energy prices higher. Before that, attention turns to tomorrow's August National Australia Bank (NAB) business confidence survey and September consumer confidence report, previewed below.

Westpac consumer confidence (September)

Date: Tuesday, 8 September at 10.30am AEST

Last month, consumer confidence jumped to 88.9 from 83.9 in July, the highest reading since March. The increase was concentrated among mortgage holders after the RBA held the cash rate at 4.35% in August.

September's print must digest a much harsher backdrop, including last week's resilient Q2 GDP report and the previous week's sticky inflation report, both of which have bolstered expectations of another RBA rate hike while falling house prices continue to dominate the headlines. A drop back into the low 80s is expected.

The Australian interest rate market starts this week pricing in 16 basis points (bp), or around a 66% chance of a 25 bp hike at the 29 September RBA Board meeting, with a full 25bp hike priced for the 3 November Melbourne Cup Day meeting.

Australia consumer confidence chart

AUD/USD technical analysis

AUD/USD's decline from the early-May high of 0.7277 found support in late June at 0.6863, just ahead of the then 200-day moving average.

The rebound from that low extended last week, with AUD/USD hitting a high of 0.7214, right in the vicinity of the 0.7210 - 0.7220 potential head and shoulders resistance area shown on the chart below.

To materially increase the probability of the head and shoulders top, AUD/USD needs to turn lower soon. Be aware that the topping pattern is only confirmed on a break of neckline support at 0.6880 - 0.6870, which would then imply a downside projection towards 0.6450.

To negate that possibility and put the May high of 0.7277 firmly back on the radar, AUD/USD needs a sustained break above resistance at 0.7210 - 0.7220.

AUD/USD weekly candlestick chart

• _{Source: TradingView. The figures stated are as of 7 September 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.}