Australian Dollar Slips as RBA Flags Inflation Risks

Key Moments

RBA Talks Tough on Inflation as AUD Retreats

AUD/USD extends its pullback for a second straight session, trading near 0.7080 during Asian trading on Wednesday, even as policymakers in Australia strike a hawkish tone. Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser reiterated that inflation is still at an unacceptably elevated level and stressed that monetary policy needs to restrain demand to cool price pressures.

Hauser noted that the RBA is not projecting a recession, but it does see a broad moderation in activity and remains highly focused on upside inflation risks. He cautioned that if price growth does not moderate sufficiently, the central bank will be compelled to raise interest rates again.

Wage Growth Softens to Multi-Quarter Low

Australia’s seasonally adjusted Wage Price Index increased 3.2% year-on-year in Q2 2026, unchanged from the revised reading for Q1 and in line with market estimates. On a quarterly basis, wages advanced 0.8%, continuing the pace observed over the previous four quarters.

Despite meeting expectations, the annual wage growth figure represents the weakest outcome since Q4 2024, underscoring a moderation in pay pressures even as the RBA maintains a vigilant stance on inflation.

UOB Sees Upside Risk Intact for AUD

Strategists at UOB Group continue to argue that “the risk for AUD is on the upside,” a stance they have maintained since early August and repeated on 17 August when AUD/USD was trading around 0.7080. At that time, they highlighted that “the risk for AUD remains on the upside but note that AUD must surpass 0.7100 before a move to 0.7120 can be expected.”

Since then, the pair has “quickly broken above both 0.7100 and 0.7120,” reaching “a high of 0.7129 before retreating,” leading UOB to identify “0.7150” as “the next level to monitor.” The bank also points out that “only a breach of 0.7070” – with the prior “strong support” noted at 0.7050 – “would mean that the upside risk has faded.”

US Data and Fed Expectations Support the Downside Floor

The latest move lower in AUD/USD is tempered by a weaker US Dollar, as markets scale back expectations of an interest rate increase by the Federal Reserve next month. Recent figures showed that US Retail Sales fell in July for the first time in nine months, adding to concerns following surprise job losses and subdued CPI inflation in the prior month.

The Fed kept its policy rate unchanged at its most recent meeting, although three officials dissented in favor of a hike. Market participants are looking to the forthcoming meeting minutes for more detail on the split within the Federal Open Market Committee. Based on the CME FedWatch tool, traders currently assign a 35% probability to a September rate increase, down from 47% a month earlier.

Technical Picture: Bullish Bias Intact Above Key Averages

On the daily chart, AUD/USD is trading at 0.7080 and maintains a constructive near-term tone, with spot holding above both the nine-period and 50-period Exponential Moving Averages (EMAs). The clustering of shorter-term EMAs just under current price action points to underlying buying interest.

The 14-day Relative Strength Index (RSI) stands at 58.4, remaining in positive territory and below overbought thresholds, suggesting that buyers may still have scope to extend gains. The pair continues to track within an ascending channel, indicating that the broader technical bias remains tilted to the upside.

On the downside, the nine-period EMA around 0.7071 is the first area of support, followed by the 50-period EMA near 0.7029, where a deeper decline would challenge the strength of the ongoing uptrend. Further below, horizontal supports at 0.6833 and 0.6400 mark more distant levels that define the broader structural base. On the upside, a sustained move through horizontal resistance at 0.7278 would signal scope for a continuation of the wider recovery phase in AUD/USD.