Aussie Dollar Holds Firm as China Boosts AUD/USD

Key Moments

China Data Lifts AUD as Manufacturing PMI Surprises to the Upside

AUD/USD advanced for a second consecutive session, trading near 0.7170 during Asian hours on Tuesday. The pair gained as the Australian Dollar (AUD) stayed supported following an upside surprise in China’s RatingDog Manufacturing Purchasing Managers’ Index (PMI).

The Chinese Manufacturing PMI climbed to 51.5 in August, up from 50.9 in July, while markets had expected the index to remain at 50.9. Given the close trade links between China and Australia, the stronger PMI reading provided a tailwind for the AUD, as shifts in Chinese economic activity can have a direct influence on Australia’s currency.

Australian Building Permits Weaken, But Beat Expectations

Domestic data out of Australia showed a mixed picture for the housing sector. Building permits fell 3.6% month-over-month in July, a smaller decline than the expected 4.8% drop. This followed a 7.2% increase in the previous reading.

On a year-over-year basis, total dwelling units approved rose 9%, slightly above the prior 8.9% increase. The figures indicate some resilience in approvals despite the monthly pullback.

Fed Rhetoric Caps AUD/USD as Rate-Hike Bets Firm

Despite support from Chinese data, AUD/USD upside remained contained as the US Dollar (USD) found buyers on renewed expectations of tighter Federal Reserve (Fed) policy. Traders increased the probability of a rate hike in September after Warsh remarked that the Fed will “have work to do” if officials are not confident that underlying inflation is returning to the 2% target.

This hawkish tilt has encouraged Dollar bulls, tempering the positive impact of stronger Chinese data and better-than-expected Australian building permits on the AUD/USD pair.

Scotiabank: Clearer Fed Inflation Signal Supports the Dollar

Strategists at Scotiabank observed that recent Fed messaging has sharpened the policy outlook by reducing uncertainty around the central bank’s inflation objective. They noted that officials have “effectively removed ambiguity around the Fed’s inflation target” and issued “a clear warning that unless inflation makes progress towards the 2% target ‘with speed’, the Fed could be pushed to tighten policy.”

According to Scotiabank, this stronger emphasis on the inflation goal is helping to sustain expectations for higher rates into the September FOMC meeting and is underpinning the US Dollar, even as it surrenders part of its latest advance.

Goolsbee Stresses Inflation Challenge While Backing Steady Rates

Fed’s Goolsbee delivered comments that leaned moderately hawkish, reflected in a 6.2/10 FXS Speechtracker score, slightly above the 6.1/10 historical average. The remarks underscored that inflation remains the key policy issue.

Goolsbee aligned with Warsh on the economic backdrop and highlighted that inflation stemming from excess demand is “hard to address” and has persisted longer than anticipated. At the same time, he indicated comfort with keeping rates unchanged at the July FOMC meeting and played down procedural aspects such as the number of policy meetings.

The overall message pointed to a Fed that remains focused on inflation risks but is not signaling an immediate rush to raise rates again without clearer signs of renewed demand-driven price pressures.

Fed Sentiment Metrics: Hawkish Tone Eases Slightly, Remains Elevated

The FXS Fed Sentiment Index declined by 0.41 points to 129.29, signaling a modest reduction in perceived hawkishness after Goolsbee’s speech. However, the index stayed well above the neutral level of 100, indicating that Fed communications continue to be interpreted as firmly hawkish.

Goolsbee’s comments reinforced the view that inflation is still the central concern, even though the FXS Speechtracker reading only marginally exceeded its historical average.

Technical Picture: AUD/USD Maintains Bullish Near-Term Structure

On the daily chart, AUD/USD is trading at 0.7170, preserving a constructive short-term outlook. Price action is holding above both the nine-day and 50-day Exponential Moving Averages (EMAs), with the shorter EMA positioned above the longer one, signaling an intact upward trend bias.

The 14-day Relative Strength Index (RSI) stands at 64.24, remaining in positive territory without yet indicating extreme overbought conditions.

On the downside, initial support is located around the nine-day EMA near 0.7156, with additional backing at the 50-day EMA around 0.7071. Together, these moving averages define a nearby demand zone. Below these levels, more substantial structural supports are situated at 0.6688, 0.6434 and 0.6348, where buyers would be expected to step in if a broader corrective move develops.