Last Updated on 20/08/2026
Australian Dollar Slips After Disappointing Labor Report
- AUD/USD comes under renewed selling pressure as weaker-than-expected Australian employment data weighs on the Australian Dollar.
- Australia’s unemployment rate climbed to 4.5% in July, exceeding the 4.4% market forecast.
- Fed minutes indicated that policymakers could support near-term rate hikes if inflation remains elevated, while the benchmark rate was kept at 3.5%–3.75%.
AUD/USD retreats after gaining more than 0.5% in the previous session, trading near 0.7120 during Thursday’s Asian session. The pair is pressured by a weaker Australian Dollar following disappointing domestic employment figures.
Australia’s unemployment rate increased to 4.5% in July, above economists’ expectations of 4.4%. Employment also deteriorated sharply, with the economy losing 15.8K jobs compared with an 80.2K increase in June and falling well short of the forecast for a 15.0K rise.
AUD Faces Additional Headwinds From RBA and China Concerns
Rabobank strategists noted that expectations for additional Reserve Bank of Australia tightening remain limited, with markets pricing in only around 12 basis points of rate hikes over the next three months. They also pointed to weaker Chinese demand for Australian commodities and softer domestic economic conditions as growing risks for the Aussie.
Still, AUD/USD could find some support from a weaker US Dollar, which has been pressured by recent economic developments and shifting Federal Reserve expectations. Minutes from the Fed’s July meeting showed that several policymakers were open to raising interest rates in the near term if inflation failed to moderate, while the benchmark rate remained unchanged at 3.5%–3.75%.
Although inflation is still above the Fed’s 2% target, recent monthly readings suggest that price pressures are easing. This has reduced expectations for an immediate rate increase. The CME FedWatch Tool now shows a 32.7% probability of a rate hike at the next meeting, down from 47% one month earlier.
Technical Analysis
AUD/USD is trading near 0.7110 on the daily chart, remaining above both the nine-period and 50-day Exponential Moving Averages (EMAs). This positioning keeps the pair’s near-term outlook moderately bullish, particularly as prices continue to move beyond the recent consolidation range.
The 14-day Relative Strength Index (RSI) stands at 63.2, indicating positive momentum while remaining below overbought territory. This suggests that buyers still have room to push prices higher, although broader Federal Reserve sentiment remains relatively subdued compared with previous peaks.
The first key resistance level is the psychological 0.7200 mark. On the downside, initial support is located around the nine-period EMA at 0.7087. A break below this level could expose the next support zone near the 50-period EMA at 0.7034, where dip-buyers may attempt to regain control.
Canadian Dollar Strengthens as Oil Prices Rise and US Dollar Weakens
- USD/CAD extends its decline as stronger crude oil prices support the commodity-sensitive Canadian Dollar.
- Oil prices climb amid heightened Middle East tensions and stalled US-Iran negotiations, raising concerns over potential supply disruptions.
- Fed minutes indicated that policymakers could favor near-term rate hikes if inflation remains elevated, while keeping the benchmark rate at 3.5%–3.75%.
USD/CAD falls for a second consecutive session, trading around 1.3800 during Thursday’s Asian session. The pair remains under pressure as the Canadian Dollar gains momentum from rising crude oil prices.
Oil prices have advanced sharply as tensions in the Middle East intensify and negotiations between the United States and Iran remain deadlocked. The situation has extended into the strategically important Strait of Hormuz. Although US President Donald Trump said oil shipments continue to pass through the waterway, he also indicated that further negotiations with Tehran remain possible.
Oil Rally Supports the Canadian Dollar
TD Securities highlighted the ongoing geopolitical risks as an important driver of crude prices, warning that the Iran conflict could escalate further. With the threat of supply disruptions still present, the bank expects Brent crude’s geopolitical risk premium to remain elevated as traders price in the possibility of additional instability across the region.
USD/CAD is also pressured by a softer US Dollar amid shifting expectations for Federal Reserve policy and recent economic data. Minutes from the Fed’s July meeting showed that officials were prepared to consider raising interest rates in the near term if inflation failed to ease, while the benchmark rate remained unchanged at 3.5%–3.75%.
Although inflation remains above the Fed’s 2% target, recent monthly figures indicate that price pressures are moderating. The signs of cooling inflation have reduced expectations for an immediate rate hike. Markets now see a 32.7% probability of a Fed rate increase at the next meeting, down from 47% one month earlier, according to the CME FedWatch Tool.
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