What to Know

  • AUD/USD was flat on Wednesday near 0.7040, but the pair remained much higher than last month’s low of 0.6865.
  • Some technical traders are framing a bullish setup with a buy entry, a take-profit at 0.7100, and a stop-loss at 0.7000.
  • A bearish scenario would involve selling the pair with a take-profit at 0.7000 and a stop-loss at 0.7100.
  • The trade horizon being watched by short-term market participants is 1-2 days.
  • Risk-on sentiment strengthened as crude oil prices fell, with Brent dropping to $78 from last month’s high of $100.
  • Oil prices weakened after President Donald Trump halted planned strikes against Iran and after Secretary Scott Bessent said a deal to reopen the Strait of Hormuz was near.
  • US services PMI figures from ISM and S&P Global are expected above 50, a level that signals expansion in the sector.
  • ADP private payrolls and July nonfarm payrolls from the Bureau of Labor Statistics are set to influence expectations for the Federal Reserve interest rate decision.
  • The Reserve Bank of Australia is due to deliver its interest rate decision next week, with a risk that policymakers could hike rates to address elevated inflation.
  • On the four-hour chart, AUD/USD has rebounded from 0.6923 to 0.7046, while the Relative Strength Index has risen to 63.

AUD/USD steadies as traders weigh risk appetite and data

AUD/USD was little changed on Wednesday, trading near 0.7040 as currency markets balanced a more constructive risk backdrop against a heavy calendar of US economic releases and the approaching Reserve Bank of Australia decision. The pair has recovered meaningfully from last month’s low of 0.6865, keeping attention on whether buyers can maintain control and push the Australian dollar toward the next major upside marker.

The Australian dollar often responds to shifts in global risk appetite because Australia is closely linked to commodities, trade flows, and broader investor confidence. When traders become more comfortable taking risk, higher-beta currencies such as the Australian dollar can attract support. That dynamic has been visible as the US dollar retreated modestly and crude oil prices moved sharply lower, easing some fears about inflation pressure and supply disruption.

For short-term technical traders, the current setup remains focused on a potential move toward 0.7100. A bullish view being watched in the market involves buying AUD/USD with a take-profit at 0.7100 and a stop-loss at 0.7000. The alternative bearish view is built around selling the pair, targeting 0.7000, and placing a stop-loss at 0.7100. The timeframe being monitored is 1-2 days, making incoming headlines and data especially important for execution risk.

Oil slide helps support risk-on tone

A key driver behind the improved mood has been the sharp decline in crude oil prices. Brent, the global benchmark, dropped to $78 after reaching last month’s high of $100. The prior surge in oil prices followed the restart of hostilities between the US and Iran, which raised concerns that energy supplies could be disrupted and that inflation pressures could become more persistent.

Those concerns eased after President Donald Trump halted planned strikes against Iran. Such strikes could have created substantial challenges for energy markets, potentially feeding through into higher inflation and a more cautious tone across risk assets. Instead, the pullback in oil prices helped reduce fears that consumers, businesses, and central banks would face a fresh energy shock.

Market sentiment also improved after Secretary Scott Bessent said a deal to reopen the Strait of Hormuz was near. Media reports suggest the arrangement would involve Iran and Oman, with Oman charging a fee to ships transiting through the Strait. Because the Strait is closely watched by energy traders, any sign that transit risks are easing can have an outsized impact on oil pricing, inflation expectations, and the broader risk environment.

For AUD/USD, the oil move matters less as a direct commodity linkage and more as a signal for global risk conditions. Lower oil prices can ease inflation concerns, reduce pressure on import-dependent economies, and soften demand for defensive US dollar positioning. If risk-on sentiment continues, it could provide a supportive backdrop for the Australian dollar in the near term.

US data takes center stage

The next few sessions carry significant event risk for AUD/USD. The US is scheduled to publish services PMI numbers, with both ISM and S&P Global readings expected to come in above 50. A reading of 50 and above indicates that the sector is expanding, so traders will focus not only on whether the figures clear that threshold but also on whether the details point to resilient demand, sticky prices, or slowing momentum.

Services data is especially important because it can shape expectations for the broader US economy. If the sector remains firm, investors may see less urgency for the Federal Reserve to adjust policy in a dovish direction. If the data weakens, the market could reassess the path of interest rates and the likely performance of the US dollar. For AUD/USD, a softer dollar response would typically help the pair, while stronger US data could create resistance for further gains.

Labor market figures will also be in focus. ADP is set to release the latest private payrolls numbers before the Bureau of Labor Statistics publishes July nonfarm payrolls. The jobs data will provide more hints about the strength of the US economy and could influence expectations for the Federal Reserve interest rate decision. Because foreign exchange markets are highly sensitive to rate differentials, the payrolls figures may become a major catalyst for AUD/USD volatility.

RBA decision adds another layer of uncertainty

Beyond the US calendar, traders are also watching the Reserve Bank of Australia interest rate decision due next week. There remains a risk that the RBA could decide to hike rates at the meeting to combat elevated inflation. That risk is important for the Australian dollar because expectations for tighter policy can support a currency, particularly when paired against a counterpart whose central bank outlook is less certain.

The challenge for AUD/USD traders is that the pair is being pulled by both sides of the equation. US data will influence the dollar leg, while the RBA decision will shape the Australian dollar leg. If US numbers soften while the RBA maintains a hawkish tone, the bullish case for AUD/USD could strengthen. If US data proves resilient and the RBA appears less aggressive, the pair may struggle to extend its rebound.

That policy mix makes the 1-2 day trading horizon particularly sensitive. Short-term setups around major data releases can move quickly, and stop-loss levels may be tested if headlines surprise. For that reason, traders watching the 0.7000 and 0.7100 boundaries are likely to treat those zones as both technical and psychological markers.

Technical picture keeps 0.7100 in focus

On the four-hour chart, AUD/USD has rebounded this month, moving from a low of 0.6923 to 0.7046. The current area is technically important because it aligns with the highest swing on August 3. A decisive move above this level would invalidate the forming double-top pattern, which is often viewed by chart watchers as a warning of a potential bearish breakout.

The Relative Strength Index has climbed to 63, its highest point since Friday last week. That reading suggests momentum has improved, though it does not by itself guarantee continuation. Traders often use RSI as a supporting indicator, looking for confirmation from price action, breakouts, or failures around key levels. In this case, sustained trade above the current resistance area could reinforce confidence in the bullish outlook.

If risk-on sentiment continues, AUD/USD may extend its rise toward 0.7100. That level is the main upside target in the bullish scenario and a key area where some traders may look to take profit. However, a drop below the psychological 0.7000 level would invalidate the bullish outlook and could shift attention back to downside risk. The 0.7000 area matters because round numbers often attract stop orders, option interest, and discretionary decision-making from short-term traders.

For now, the pair is holding a constructive tone, but confirmation remains essential. The combination of falling oil prices, upcoming US PMI readings, payrolls data, and the RBA decision means AUD/USD could remain active. The bullish case is intact while the pair holds above 0.7000, with 0.7100 standing as the level bulls need to challenge to show that the rebound has further room to run.

Frequently Asked Questions (FAQs)

What is the current AUD/USD outlook?

The near-term outlook is cautiously bullish while AUD/USD holds above 0.7000. Technical traders are watching for a possible move toward 0.7100, supported by improved risk sentiment and the pair’s rebound from recent lows.

What is the bullish trade setup for AUD/USD?

The bullish setup being monitored involves buying AUD/USD with a take-profit at 0.7100 and a stop-loss at 0.7000. The expected timeline for this short-term scenario is 1-2 days.

What would invalidate the bullish AUD/USD view?

A drop below the psychological 0.7000 level would invalidate the bullish outlook. That move would suggest buyers are losing control and could shift attention toward the bearish scenario.

What is the bearish setup for AUD/USD?

The bearish setup involves selling AUD/USD with a take-profit at 0.7000 and a stop-loss at 0.7100. This view becomes more relevant if the pair fails to sustain its rebound and slips below key support.

Why are oil prices important for AUD/USD?

Lower oil prices have supported risk-on sentiment by easing concerns about energy-driven inflation and supply stress. A stronger risk mood can help higher-beta currencies such as the Australian dollar and weigh modestly on the US dollar.

Which US data releases matter for AUD/USD this week?

Traders are watching US services PMI figures from ISM and S&P Global, ADP private payrolls, and July nonfarm payrolls from the Bureau of Labor Statistics. These releases can influence expectations for the Federal Reserve interest rate decision.

How could the RBA decision affect the Australian dollar?

The Reserve Bank of Australia decision next week could affect AUD/USD because there is still a risk of a rate hike to combat elevated inflation. A more hawkish RBA stance could support the Australian dollar.

What does the RSI reading suggest?

The Relative Strength Index has risen to 63, its highest point since Friday last week. This suggests stronger upward momentum, though traders will still look for confirmation from price action around resistance.

What is the key upside level for AUD/USD?

The key upside level is 0.7100. If AUD/USD continues to benefit from risk-on sentiment and breaks above nearby resistance, that level is the main target being watched by bulls.

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