AUD/USD Forecast This Week — Outlook, Drivers & Key Levels

Current Market Picture

AUD/USD is trading at 0.7175, up a modest 0.87% as the market edges higher. Directional momentum continues to define aussie dollar, with the trend firmly in control of price action.

Market consensus cautiously bullish on AUD supported by USD weakness, the 72bp RBA rate advantage, and elevated iron ore prices, with AUD approaching 52-week highs at 0.7257 and trading near the 90th percentile of its 1-year range

Key Drivers This Week

Primary driver: USD weakness from US Treasury bond buyback announcement on Aug 21, 2026, which weakened the dollar broadly and pushed AUD through 0.7150 resistance toward 0.7175 — the primary catalyst is external (USD-driven) rather than AUD-specific fundamental strength

Secondary factor: RBA August 11 Statement on Monetary Policy confirmed inflation not expected to return to target midpoint until early 2028, maintaining a tightening bias at 4.35% — the 72bp policy spread versus Fed at 3.63% continues to provide structural support for AUD carry flows

Additional influence: Australian July employment unexpectedly fell with jobless rate hitting highest since late 2021 (Reuters Aug 20), a bearish fundamental development that the market has largely shrugged off, suggesting USD weakness and rate differential dynamics are overriding domestic labor market softness

Economic backdrop: RISK-ON: VIX at 15.87 (well below 20 threshold), USD weakening (-2.28% monthly), 2s10s curve at +50bp normalising, US inflation at 2.34% trending toward target, Fed on hold at 3.63% — the macro backdrop is supportive for risk assets and commodity currencies broadly

Fundamental assessment: AUD modestly undervalued at ~0.3% below PPP fair value of 0.72, supported by elevated iron ore prices at $105/ton and 72bp RBA policy advantage, but Australian labor market weakening and Q1 current account deficit at AUD 27.1B are accumulating structural headwinds

Price Structure

Bullish trend intact with price at 0.7175 above 50-day MA (0.7045) and 200-day MA (~0.6900), maintaining higher highs structure, but RSI at 68.13 approaching overbought territory near 52-week high resistance at 0.7257

Trend strength sits at 6/10, reflecting a market that has directional bias but hasn't reached extreme conviction.

Upside & Downside

Primary risk: Australian July employment data showed jobless rate at highest since late 2021 (Aug 20), a material deterioration in the labor market that has been ignored amid USD weakness but could refocus attention on domestic economic softness if USD rebound occurs, triggering AUD pullback from near 52-week highs toward 0.7100-0.7045 (Probability: medium)

Primary opportunity: Australian July inflation data due Aug 26 (CPI YoY est 3.2% vs prev 3.8%, Trimmed Mean est 3.5% vs 3.6%) could show further disinflation, but if headline inflation surprises to upside it would reinforce RBA tightening bias and the 72bp policy divergence narrative, potentially pushing AUD through 0.7185 toward 0.7257 52-week high as speculative shorts (-44,159 contracts) scramble to cover (Timeframe: 24-48 hours post Australian CPI release on August 26)

This week's edge: Below Min Signal threshold — no directional call. The weighted signal of +0.80 falls below the FX_MAJOR threshold of 1.1, mandating NO CALL per Rule 2. The key blindspot the desk has identified is the divergence between AUD's price strength (+3.04% monthly) and deteriorating domestic fundamentals (July employment miss, jobless rate highest since late 2021, declining terms of trade from 117 to 111.90). This week brings back-to-back binary catalysts (RBA Minutes Aug 25, Australian CPI Aug 26, US Core PCE Aug 26) creating genuine two-way uncertainty that prevents directional conviction. The desk maintains a mild BULLISH structural lean based on the RBA policy advantage (4.35% vs Fed 3.63%), AUD undervaluation (~0.3% below PPP fair value), and the squeeze potential from -44,159 net shorts, but lacks the signal strength and catalyst proximity to convert this into a directional call above the Min Signal threshold.

Volatility Context

At the 42th percentile, AUDUSD volatility sits in a normal range, neither compressed enough to signal a breakout nor elevated enough to demand caution. Realised vol is holding its current level, suggesting the market has found a temporary equilibrium in its risk pricing.

Normal volatility at 42nd percentile with 20-day realised vol at 6.4% annualised suggests 45-65bp daily ranges — stable but uninformative environment until this week's binary catalysts resolve; breakout above 0.7185 or breakdown below 0.7130 needs sustained follow-through from Australian CPI or US Core PCE data

Week Ahead Outlook

The next major catalyst is RBA Meeting Minutes (Aug 11 decision) — details on the Board's thinking around the hold decision, inflation trajectory assessment, and any dissent regarding the tightening bias on Tuesday 25 August — a high-impact event that could materially shift the directional picture.

For aussie futures, the balance between existing momentum and scheduled risk events sets the stage for the week ahead.