AUD/USD breaks above 0.7100 for first time since June as soft US data weighs on greenback

Softer US data and hawkish RBA support AUD/USD  

AUD/USD finished higher last week at 0.7085 (+0.24%), its highest weekly close in 12 weeks. The Australian dollar’s gains came as the Reserve Bank of Australia (RBA) kept rates on hold and maintained a hawkish bias, while cooler-than-expected US economic data weighed on the greenback.

Last Tuesday, the RBA left the cash rate unchanged at 4.35%, as widely expected. In the accompanying statement and press conference, Governor Michele Bullock kept the door open to further tightening if inflation risks materialise. That hawkish bias provided a solid undercurrent of support for the Aussie.

The bigger driver for the pair, however, has been the softer run of recent US data. July’s consumer price index (CPI) and producer price index (PPI) reports both came in cooler than expected, while Friday’s retail sales print showed a 0.6% month-on-month (MoM) decline, the first fall since October 2025.

Combined with a sharp drop in the University of Michigan’s preliminary August consumer sentiment reading to 51.0 from 55.2 previously, those results have lifted the odds of the Federal Reserve (Fed) remaining on hold at its September meeting to around 70%. The resulting reduction in relative yield support for the US dollar has given the Australian dollar room to push higher.

That momentum has carried into the new week, with AUD/USD trading above the 0.7100 level for the first time since early June.

Looking ahead, the main drivers of the Aussie this week will come from a mix of local and offshore sources, with Thursday’s Australian labour force update, previewed below, the key domestic release to watch.

Labour force

Date: Thursday, 20 August at 11.30am AEST

Last month, the June employment report delivered a stronger-than-expected outcome, with employment rising by 76,300, well above the +15,000 consensus forecast. At the same time, the unemployment rate held steady at 4.4%, while the participation rate climbed to 67.0% from 66.7%.

At its Board meeting last week, the RBA noted that 'labour market conditions have eased by a little more than expected in recent months', while leading indicators pointed to only limited further easing in the near term.

In the updated forecasts accompanying the decision, the RBA revised its unemployment rate projections higher and now expects the jobless rate to rise to 4.5% by the end of 2026 and peak at 4.8% by mid-2028.

Looking ahead to the July update, the forecast is for a modest increase of around 10,000 jobs, with the unemployment rate expected to hold steady at 4.4%, aided by a small decline in the participation rate to 66.9%.

A softer-than-expected result, particularly a rise in the unemployment rate towards 4.6%, would reinforce the view that the labour market is loosening in line with the RBA’s updated forecasts and raise the prospect of the central bank remaining on hold through year-end.

Conversely, a strong report would keep tightening risks alive ahead of the RBA’s next Board meeting in September.

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

Australian unemployment rate 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 has found a second wind in August, with the pair today pushing above the critical 0.7080 - 0.7100 zone, the same area from which it broke down in early June after completing a head-and-shoulders topping pattern.

Looking ahead, if the break above the 0.7080 - 0.7100 resistance zone is sustained over the coming sessions, it would increase the chances of a retest, and potentially a break, of the early-May high at 0.7277.

AUD/USD daily chart

• _{Source: TradingView. The figures stated are as of 17 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.}