The Australian Dollar (AUD) opened the week on a firm footing against the US Dollar (USD), with AUD/USD trading near 0.6590, up roughly 0.5% in early sessions. Gains were supported by positive Chinese trade data and a softer US Dollar, weighed down by weaker employment indicators and rising market expectations of a Federal Reserve (Fed) rate cut in September.
Attention turns to Australia on Tuesday, where traders await the Westpac-Melbourne Institute Consumer Confidence Index for September, scheduled for release at 10:30 AEST (00:30 GMT). In August, the index surged 5.7% to 98.5, marking a three-year high and fueling hopes that a prolonged period of household pessimism may be easing.
Forex participants are closely monitoring these domestic developments ahead of the next Reserve Bank of Australia (RBA) policy meeting at the end of the month.
Technical outlook: AUD/USD bullish momentum strengthens
The AUD/USD pair continues to benefit from bullish momentum triggered by the recent US Nonfarm Payroll report, which pressured the US Dollar.
The pair’s break above the 0.6560 level confirmed a double bottom formation around 0.6420, reinforcing the short-term bullish bias. Immediate upside targets are seen at 0.6600, in line with the current short-term uptrend channel, followed by the August peak near 0.6620.
On the downside, a drop below 0.6560 could undermine the upward momentum, potentially driving the pair toward the lower end of the channel near 0.6530–0.6540.
Growth and confidence: Australian consumers back on track
Australian GDP expanded by 0.6% quarter-on-quarter and 1.8% year-on-year in Q2, outperforming expectations and signaling a rebound in economic activity after a slow start to the year impacted by adverse weather. Household spending was the key driver, contributing 0.4 percentage points to growth, while the savings rate eased back to 4.2%.
“Year-end sales and the approach of the holiday season boosted discretionary purchases,” said Tom Lay, head of national accounts at the Australian Bureau of Statistics, as cited by ABC News Australia.
Public investment contracted by 3.9%, reflecting the conclusion of several infrastructure projects, while private investment remained subdued.
The August jump in consumer confidence appears to have shifted sentiment. “This long period of consumer pessimism may finally be coming to an end,” noted Matthew Hassan from Westpac. Should September’s survey confirm this trend, it would signal two key outcomes: immediate support for the AUD through domestic risk appetite, and a macroeconomic transition toward more private-led growth as fiscal support normalizes. Conversely, a sharp decline in confidence could highlight persistent constraints, including weak productivity, high labor costs, and early signs of labor market fatigue.
Monetary policy: RBA pauses, Fed weakness supports AUD
Stronger domestic data has tempered expectations for RBA easing. Rabobank reports the market now prices in just under a 20% probability of a rate cut at the September 30 meeting, following Q2’s better-than-expected growth.
At IG, Tony Sycamore anticipates no rate cut in September, projecting a 25 basis point reduction in November and another in March 2026, with a terminal rate around 3.10%. Similarly, JP Morgan’s Tom Kennedy expects only one final cut in November (terminal 3.35%). The case for easing is that inflation has returned to the 2–3% target range, though productivity remains weak and private investment remains shallow.
Meanwhile, the US Dollar’s recent weakness reflects a moderation in the US labor market and heightened prospects of Fed easing. This monetary policy divergence — the Fed edging toward rate cuts while the RBA remains on hold — reduces carry for the Greenback and mechanically supports cyclical currencies, including the AUD.
