AUD/USD climbs for a fourth day to 0.7218 as Fed-hike bets fail to lift the dollar; RBA speakers and US CPI now in focus

The Australian dollar is riding a thin, holiday-thinned market higher even as the fundamental backdrop points the other way. August US nonfarm payrolls, released on September 4, blew past expectations and lifted the implied probability of a September Fed rate hike to 58.4% — yet the greenback has failed to build on that, giving AUD/USD room to climb for a fourth straight session. With Westpac consumer confidence and two Reserve Bank of Australia (RBA) officials on the wires today, US PPI and CPI due later this week and the September 15-16 FOMC looming, the 0.72 handle is the battleground.

Friday's jobs report was the week's big surprise: nonfarm payrolls rose by 162,000 in August versus roughly 56,000 expected, with June-July revised higher, and the CME FedWatch tool now prices a 25bp hike at the September FOMC at 58.4%, up from 49.4% the day before. But Monday (September 7) was the US Labour Day holiday, and with liquidity thin, the US Dollar Index slipped 0.26% to near 98.90 instead of extending its gains. AUD/USD accordingly rose for a fourth consecutive day, bouncing off an intraday low of 0.7194 to trade near 0.7218 at the time of writing, up 0.22% on the day. Complicating the dollar's reaction is geopolitics: the US-Iran standoff over the Strait of Hormuz sits alongside reports that Tehran and Oman are close to a de-escalation deal, leaving oil and the dollar hesitant while markets avoid chasing the greenback ahead of inflation data and the Fed decision.

Beyond a diluted "bad news is good news" reaction, the Australian dollar has its own tailwinds in this tug-of-war. First, the rate differential still favours the Aussie: the RBA's cash rate sits at 4.35% — it has hiked three times this year and held in August — and with markets expecting at most one more hike from the Fed, the carry advantage keeps the currency attractive within the G10. Second, commodity prices remain firm: iron ore and copper, Australia's key exports, are underpinned by solid demand, giving the commodity currency a fundamental floor. The failure of the dollar to rally on hike bets, meanwhile, signals that the "rate-hike trade" is already showing signs of fatigue in thin conditions.

Domestic data and central-bank guidance are the near-term focus for the Aussie. Today's docket features the Westpac consumer confidence reading for September, while RBA Deputy Governor Andrew Hauser and Assistant Governor Sarah Hunter are both scheduled to cross the wires. With the RBA's next decision not due until September 29, the market remains split on the policy path: strategists at Brown Brothers Harriman noted in mid-August that cash-rate futures still imply roughly a 60% probability of one final 25bp hike to 4.60% this year, but argued the risk is skewed toward a more extended pause given policy is already somewhat restrictive. Dovish-sounding officials or a soft confidence print could check the Aussie's rise; a reiteration of inflation concerns that keeps the door open to another hike would give the move above 0.72 more conviction.

For Australian-based readers, AUD/JPY is a more direct gauge of global risk appetite than AUD/USD. The yen has surged on September-hike expectations at the Bank of Japan and stronger wage data, driving USD/JPY down to levels not seen since February; AUD/JPY has fallen from its late-August high near 114.96 and broken below the August 19 support at 112.73, now drifting toward the 110 handle. The fact that the Australian dollar is holding up against the US dollar while easing against the yen is a telling divergence — high-yielder pressure is coming from the safe-haven side of the market rather than the dollar side. Anyone with AUD/JPY exposure or yen conversion needs should brace for wider swings around the BOJ's September 17-18 meeting.

AUD/USD trades near 0.7218, holding comfortably above its 50-day moving average (near 0.7045) and tracking a series of rising trend-line supports on the daily chart; the 14-day RSI around 68 suggests firm, if not yet extreme, upside momentum. While 0.72 holds, the absence of clearly defined overhead resistance leaves the path of least resistance to the upside, opening the way toward fresh yearly highs. A break below the 0.7198 ~ 0.72 confluence (horizontal support and the rising trend-line pivot) would signal a deeper corrective phase, with the 0.70 round figure the first stop before the 0.7045 50-day moving average and medium-term trend line — a loss of that zone would call the four-day rally into question.

This is a packed week for the dollar side of the trade: US PPI lands on Thursday (September 10) and the August CPI report on Friday (September 11) — the Cleveland Fed's nowcast points to headline CPI near 3.38% year on year versus 3.4% previously, with core around 2.38% — before the September 15-16 FOMC decision. For AUD/USD, US inflation is now the swing factor: if CPI cools and Fed-hike odds ease, a softer dollar should push the pair through 0.72; if inflation proves sticky and hike bets rise further, the 0.72 support will face its real test. The RBA's September 29 decision will in turn shape the Aussie's medium-term direction into month-end.

Related reads: for the dollar side of this setup, see our US Dollar Index forecast as Fed bets and Iran risks collide; for how the Australian dollar has traded against a struggling greenback over the past month, see Australian Dollar gains as US Dollar struggles amid fading Fed rate hike bets.