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Australian Dollar Outlook: Dip Buyers to Circle The Aussie

The Australian dollar is finding support as dip buyers emerge, though RBA caution and US PCE inflation could cap AUD/USD’s upside.

Matt Simpson
Matt Simpson

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Australian Dollar Outlook: Dip Buyers to Circle The Aussie

The Australian dollar is drawing interest from dip buyers after finding support near key technical levels. Last week’s rally came on the back of Jerome Powell’s dovish Jackson Hole speech, which fuelled renewed bets on Fed cuts and weakened the US dollar. Still, with the RBA reluctant to ease further immediately and US PCE inflation in focus this week, upside for AUD/USD could remain limited.

AUD cross-rates table (22 Aug 2025) showing AUD/USD at 0.6486, AUD/EUR at 0.5535, AUD/GBP at 0.4796, AUD/JPY at 95.34, AUD/CHF at 0.5205, AUD/CAD at 0.8967, and AUD/NZD at 1.1062, with 60-day trend lines and 10-day candlesticks highlighting mixed momentum across pairs.

 

 

Powell’s Dovish Fed Boosts the Australian Dollar

The Australian dollar closed last week with its best daily performance in three months, fuelled by US dollar weakness following Jerome Powell’s Jackson Hole speech. Powell acknowledged labour market weakness, noting a “curious balance” between slowing supply and demand—raising risks of higher unemployment and fewer layoffs.

His comments effectively green-lighted a September cut while leaving room for another in December if employment conditions deteriorate. Fed funds futures now imply an 83% chance of a September cut, though odds for December remain lower at 49.2%.

RBA Likely to Remain Cautious Following Strong Jobs Data

Australia’s recent data is unlikely to push the Reserve Bank of Australia (RBA) into immediate action. Unemployment dipped to 4.2%, and the 60.5k surge in full-time jobs offset last month’s -38.2k fall. Consumer sentiment also rose strongly in response to the RBA’s earlier 25bp cut, lowering the odds of another near-term move.

The RBA minutes are unlikely to shift the outlook, with forecasts still allowing for only one more cut this year and another 25bp in each half of 2026.

Economic calendar for 26–30 August 2025 (AEST), highlighting RBA meeting minutes, Australian Q2 capital expenditure, US GDP and PCE prices, and Fed speakers as key events for AUD/USD traders.



 

US PCE Inflation in Focus for AUD/USD

Markets now turn to US PCE inflation — the Fed’s preferred gauge. Core CPI already climbed to 3.1% y/y, and if core PCE edges closer to 3%, it could erode odds of a December cut. This would risk a US dollar rebound and cap further AUD/USD gains.

US PCE inflation chart showing core PCE at 2.8% and headline PCE at 2.6%, both above the Fed’s 2% target but trending lower since 2022, highlighting inflation risks for AUD/USD.

 

AUD/NZD and Cross-Currency Correlations

The RBNZ delivered a dovish 25bp cut last week, sparking a 0.9% rally in AUD/NZD to a near four-month high. This move has seen the previously near-perfect 10-day correlation between AUD/NZD and NZD/USD ease to 0.78. However, given the US dollar’s dominance post-Jackson Hole, correlations across AUD/USD, AUD/NZD and NZD/USD are likely to remain strong.

AUD/USD rolling correlation table showing strong positive links with NZD (0.86–0.91) and S&P 500 (0.91, 10-day), and strong inverse correlation with US dollar index (DXY, -0.72 to -0.82), highlighting cross-currency and risk sentiment drivers.

Chart analysis by Matt Simpson - data source: CME, LSEG

 

AUD/USD Futures Positioning (COT Report)

Net-short exposure on AUD/USD futures climbed again last week, with asset managers and large speculators reaching fresh 14- and 16-month highs. Rising open interest confirms momentum behind the bearish positioning.

However, renewed Fed cut expectations and US dollar weakness may drive short-covering, offering near-term support for the Australian dollar.

AUD/USD futures COT chart showing rising net-short exposure among asset managers and speculators at 14- and 16-month highs, with open interest trending higher, highlighting strong bearish positioning despite potential for short-covering.

Chart analysis by Matt Simpson - data source: CME, LSEG

 

AUD/USD Technical Outlook

On the weekly chart, AUD/USD remains rangebound between 0.64 and 0.66. While the lower wicks around 0.6420 suggest dips could be bought, bulls may hesitate unless the Fed signals multiple cuts.

The 50-week EMA at 0.6472 and 200-day EMA at 0.6455 provide key support levels for potential swing lows. Still, with Friday’s rally stalling at the 50-day EMA, a near-term pullback cannot be ruled out.

AUD/USD weekly and daily charts showing price range between 0.64 and 0.66, with support at the 50-week EMA (0.6472) and 200-day EMA (0.6455), resistance near 0.66, and potential for a short-term pullback after stalling at the 50-day EMA.

Chart analysis by Matt Simpson - data source: TradingView AUD/USD

 

View the full economic calendar
View the full economic calendar

 

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

 

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