AUD/USD finishes at three-month high on US Treasury move as AU CPI looms

Treasury buybacks fuel AUD/USD gains before inflation update

AUD/USD finished higher last week at 0.7169 (+1.24%), its highest weekly close in three months. The Aussie's gains came as the US dollar hit a three-month low after the surprise US Treasury decision to double its long-end buybacks, triggering a sharp sell-off in the greenback.

Just two weeks after releasing its schedule for buying back older Treasury securities, the US Treasury Department announced it would 'at least double' its planned purchases of outstanding 10-year - 30-year debt.

While the buybacks are not quantitative easing (QE), because there is no net liquidity injection into the system, they have unnerved the market. By effectively drawing a line in the sand on long-end yields, the Treasury has given markets a target to shoot for. That has generated credibility concerns and raised uncertainty about what comes next, particularly as yields were already at multi-decade highs.

This was behind the strong return of the debasement trade last week, which saw flows out of the US dollar and into the Aussie, gold, silver and Bitcoin. Whether strong demand for AUD/USD will continue this week will likely depend on the usual mix of factors at home and abroad.

From an offshore perspective, we will be watching the US Treasury Department for its next move, with 30-year yields hovering just below multi-decade highs. We will also be watching the reaction, both in markets and from Tehran, to Treasury Secretary Bessent's press conference later today, where he is expected to announce an economic D-day-type sanctions package on Tehran and countries that conduct trade with Iran.

At home, the main driver is likely to be the outcome of Wednesday's inflation update previewed below.

Inflation (July)

Date: Wednesday, 26 August at 11.30am AEST

June's consumer price index (CPI) data saw headline inflation ease to 3.8% year-on-year in the 12 months to June 2026, down from 4.0% in May and below the 4.0% consensus. The Reserve Bank of Australia (RBA)'s preferred measure, the trimmed mean, held steady at 3.6% year-on-year (YoY), also coming in below the 3.8% forecast.

The cooler June print, combined with Governor Bullock's more balanced tone acknowledging weakness in housing and employment, sealed the RBA's decision to hold the cash rate at 4.35% at its Board meeting earlier this month.

Looking ahead to Wednesday's July monthly CPI release, the expectation is for the headline rate to fall sharply to 3.2% YoY (due to a 1.3% rise last July dropping out), with the trimmed mean easing to 3.5%.

An in-line or cooler core reading would reinforce the case for the RBA to stay on hold at its September Board meeting. A hotter-than-expected trimmed mean would likely see markets rebuild the possibility of further tightening this year.

The Australian interest rates market starts this week pricing in 4 basis points (bp) of tightening for the RBA's September Board meeting, with a cumulative 15 bp of rate hikes priced before year-end.

All groups CPI and trimmed mean 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 0.6863 low extended last week, taking AUD/USD above the 0.7100 resistance zone that it broke down from in late June, before hitting a high of 0.7180 on Friday.

Looking ahead, a break above the 0.7189 high from 11 March would negate the possibility that AUD/USD is carving out a longer-term head and shoulders topping pattern (best viewed on the weekly chart) and open the way for a retest and break of the early-May high at 0.7277.

Aware that if AUD/USD fails to see a sustained break above the 0.7190 resistance area, there is a risk it retraces back to near-term support at 0.7100 before medium-term support at 0.7020 - 0.7000.

AUD/USD daily candlestick chart

• _{Source: TradingView. The figures stated are as of 24 August 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.}