AUD/USD, ASX 200 Outlook: Australia’s Consumers Rejoice Latest RBA Cut

Australia’s consumers turned more optimistic following the Reserve Bank of Australia’s (RBA) latest rate cut, according to the Westpac-MI survey. Most internal indices improved in line with the broader sentiment reading, with several posting double-digit annual gains. The only areas showing weakness were unemployment and interest rate expectations — which, paradoxically, signal a positive outlook for household confidence.

View related analysis:

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• AUD/USD, EUR/AUD Technical Outlook: Australian Dollar Under Pressure
• AUD/USD Softens, ASX Hits Record as RBA Cuts and Lowers Cash Rate Projection

 

Ironically, this buoyant sentiment may encourage the Reserve Bank of Australia (RBA) to proceed more cautiously with further rate cuts. With full-time employment rebounding after the most recent policy move, it seems unlikely that the central bank will cut rates again as early as September. The debate now centres on whether the RBA will opt for another cut by December, follow up in H1 2026, and potentially deliver a third in H2. RBA cash rate futures currently imply a 32% chance of a September cut, which looks optimistic given the latest data.

Charts prepared by Matt Simpson, Market Analyst – data source: Westpac-Melbourne Institute

 

Consumer Sentiment Rises as RBA Faces Policy Dilemma

Key survey takeaways:

• Consumer sentiment rose 5.8% to 98.5 in August, with all internal indices rising in tandem.
• Family finances rose 6.3% to a 4-month high and finance expectations over the next 12 months rose 5.4% to 106.6 – on par with its long-term average.
• Consumers also have a rosy outlook on the economy, with conditions expected to improve over the next year and next five years, up 7.6% and 5.4% m/m respectively.
• Unemployment expectations are also lower by -2.4% m/m and -5.9% y/y, which is not bad given unemployment remains low by historical standards.

 

Australian Bond Yields Rise as RBA Cut Bets Recede

Chart analysis by Matt Simpson - Source: TradingView Australia 3Y yield, AUD/USD, ASX SPI 200 Index Futures

 

3-Year Yield Outlook

Australia’s 3-year yield is higher for a third consecutive day. The rally began after a stronger-than-expected employment report lowered expectations of another imminent RBA cut, while higher US yields ahead of the Trump–Zelinsky meeting are also providing a tailwind.

AUD/USD Technical Outlook: Australian Dollar vs US Dollar

The Australian dollar (AUD/USD) remains in a tight range near Monday’s low, which itself formed as a bearish outside day. My broader bias remains for new lows on AUD/USD, potentially towards the 0.64 handle before a more meaningful swing low develops. With Jerome Powell unlikely to be as dovish as markets hope at the Jackson Hole symposium, and the US dollar index holding above support, rallies in AUD/USD may be capped ahead of its next leg lower.

ASX 200 Technical Analysis: Australian Stocks Index

The ASX 200 continues to trend higher towards my 9,000 target, although bulls have hit a short-term hurdle. A small spinning top doji formed on Monday at the record high, warning of a potential pullback. If prices close near current levels, a three-day bearish reversal pattern (evening star formation) could materialise.

Still, the broader trend remains bullish, and traders are more likely to buy dips into support. Notably, the weekly and August VPOC (volume point of control) sits just below 8,800 and could provide a platform for a swing low if a pullback extends that far.

 

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-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge