Forex News

• The Australian Dollar strengthens against the US Dollar as improving prospects for a US-Iran agreement boost risk appetite.
• Strong Australian employment and inflation indicators reinforce expectations that the RBA will maintain a hawkish stance.
• Investors now turn their attention to the US July employment report, which could shape expectations for the Fed's next policy moves.

AUD/USD trades around 0.7035 on Tuesday at the time of writing, up 0.50% on the day. The pair is supported by improving market sentiment after US Treasury Secretary Scott Bessent said that an agreement with Iran to reopen the Strait of Hormuz could be reached as soon as Tuesday or Wednesday. His comments triggered a sharp decline in Oil prices as markets priced in a gradual normalization of global Energy supplies.

The improvement in risk sentiment is supporting the Australian Dollar (AUD), a currency that typically performs well during periods of stronger investor confidence. Although Iranian officials previously denied holding direct negotiations with Washington, investors are currently focusing on the prospect of easing tensions in the Middle East.

The Australian Dollar is also drawing support from encouraging domestic data. ANZ-Indeed Job Ads rose by 2% in July after declining 0.2% in the previous month, highlighting resilient labor demand despite a cooling economy. At the same time, the TD-MI Inflation Gauge rebounded by 1% MoM, marking its first increase since April and reinforcing concerns that inflationary pressures are re-emerging.

In recent remarks, Reserve Bank of Australia (RBA) Governor Michele Bullock reiterated that underlying inflation remains too high and warned that price pressures could accelerate further, partly due to previous energy market disruptions. Her comments continue to support expectations for a restrictive monetary policy stance, with markets still fully pricing in one additional rate hike this year.

In the United States (US), investors are now focused on the July employment report due on Friday. A stronger-than-expected set of labor market data could reinforce expectations that the Federal Reserve (Fed) will keep interest rates higher for longer, limiting downside pressure on the US Dollar (USD). At the same time, the recent decline in Energy prices has eased expectations of monetary tightening as markets continue to reassess the outlook for US monetary policy. According to the CME FedWatch Tool, the chances for a September rate hike fall to 56.9% from 67.2% a day earlier.

AUD/USD technical analysis

In the one-hour chart, AUD/USD trades at 0.7038, maintaining a bullish near-term bias as price holds above the 100-period simple moving average (SMA) at 0.7003 and the 200-period SMA at 0.6992. The pair also trades above the upward-sloping trend-line support around 0.7008 and the horizontal support around 0.7020, while the Relative Strength Index (RSI) near 70 hints at strong but increasingly stretched upside momentum.

On the downside, initial support is located at the horizontal level around 0.7020, followed by the trend-line area near 0.7008 and then the 100-period SMA at 0.7003, ahead of deeper protection from the 200-period SMA at 0.6992. On the topside, immediate resistance is seen at 0.7050, where a sustained break higher would open the way for an extension of the current advance.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Standard Chartered analysts Dan Pan and Steve Englander discuss the Federal Reserve’s Financial Conditions Impulse on Growth (FCI-G) index, noting it was highly accommodative in May 2026 and still supportive after the July FOMC. They highlight that recent equity sell-offs, a stronger Dollar and higher long-term rates have only moderately tightened conditions, and assess how this affects one-year-ahead US GDP growth projections.

Fed model shows still-loose conditions

"The Fed’s Financial Conditions Impulse on Growth (FCI-G) index was at its most accommodative level in May 2026 since the early 2000s, excluding the immediate COVID period."

"According to the Fed’s model, loose financial conditions ahead of the June FOMC were estimated to add more than 1.1ppt to GDP growth over the next year."

"Our subsequent FCI-G estimate – updated after the July FOMC meeting – shows that while the equity-market sell-off, a stronger USD and higher long-term rates tightened financial conditions between the June and July meetings, these moves were moderate compared to the financial-market rallies of the past few months."

"Our updated estimate shows that financial conditions are still set to boost one-year-ahead GDP growth by 0.9ppt."

"Our calculations show that the growth impulse from FCI-G would have been 0.1ppt higher if financial markets had stayed at pre-June FOMC levels."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• JOLTS Job Openings declined to 7.359 million in June.
• US Dollar Index stays below 100.00 in the American session on Tuesday.

The number of job openings stood at 7.359 million in June, the US Bureau of Labor Statistics reported on Tuesday. This print followed the 7.537 million openings reported in May and came in slightly below the market expectation of 7.4 million.

"Hires were unchanged at 5.3 million, while total separations changed little at 5.4 million. Within separations, quits (3.2 million) and layoffs and discharges (1.8 million) were unchanged," the BLS noted in its press release.

Market reaction to JOLTS Job Openings data

The US Dollar (USD) Index edges slightly lower in the American session on Tuesday and was last seen losing 0.12% on the day at 99.87.

HSBC strategists discuss the US Dollar (USD) reaction to the July Federal Open Market Committee (FOMC) meeting, where the Federal Reserve (Fed) kept rates at 3.50-3.75% despite some dissent for a hike. They highlight a dovish market interpretation of Chair Warsh’s comments but maintains a constructive USD outlook, expecting the US Dollar (USD) to grind higher on resilient United States (US) economic activity and widening interest rate differentials.

Fed hold but Dollar outlook firm

"The Federal Open Market Committee (FOMC) kept the policy rate unchanged at 3.50-3.75% at its 28-29 July meeting. While this was in line with the near-unanimous economist consensus, markets had priced a 35% chance of a 25bp hike, leading to immediate USD weakness as rate expectations were modestly repriced lower."

"Federal Reserve (Fed) Chair Warsh avoided explicit guidance on the likelihood of a near-term hike, which the market interpreted as dovish and USD-negative. He also provided limited insight into the committee’s internal debate, instead reiterating the shared commitment to return inflation to the 2% target and referencing a discussion centred on four questions – including the impact of recent economic shocks and supply-chain strains – without disclosing the committee’s conclusions."

"The debate likely echoed recent Fed rhetoric. Hawkish members have argued for higher rates given persistently above-target inflation, a resilient US labor market and easy financial conditions, while the dovish contingent favours patience to allow more time to assess conditions and decide on next steps. Although the press conference did not deliver a “hawkish hold” tone, the emphasis on achieving 2% inflation suggests the door remains open to tightening if needed."

"Overall, we do not expect this meeting to derail our generally constructive USD outlook. The Fed’s narrative has shifted from an easing bias to a willingness to hike, a transition that has come alongside resilient economic activity, upside inflation risks and widening interest rate differentials. Geopolitical risk may also provide sporadic USD support although FX sensitivity to the US-Iran conflict is waning. We continue to expect modest USD strength ahead despite this setback."

"We expect the USD to grind higher supported by widening interest rate differentials and robust US economic activity."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• USD/CAD reverses earlier losses as falling Oil prices weigh on the Canadian Dollar.
• Lower Oil prices ease rate-hike pressure on both the Fed and Bank of Canada.
• Traders await US and Canadian employment data for fresh policy clues.

USD/CAD reverses its earlier losses on Tuesday as falling Oil prices weigh on the commodity-linked Canadian Dollar (CAD) following comments from US Treasury Secretary Scott Bessent on US-Iran talks.

At the time of writing, the pair trades around 1.4068, marking a fresh weekly high.

“We are in talks with the Iranians,” Bessent told CNBC’s Squawk Box. “There is a chance we may have a deal today or tomorrow to open the strait of Hormuz and move towards a more normalized position in this conflict.”

The US Dollar (USD) weakened slightly following the remarks, but the decline in Oil prices outweighed the move and left the Canadian Dollar under pressure. The Loonie is sensitive to Oil price movements because Canada is a major exporter of Oil.

West Texas Intermediate (WTI) trades around $75.50, down nearly 4% on the day and at its lowest level since July 13.

Lower Oil prices also ease energy-driven inflation pressures, reducing the need for central banks to maintain restrictive monetary policy or consider raising interest rates.

For the Federal Reserve (Fed), the decline in energy prices has weakened expectations of a September rate hike, with the CME FedWatch Tool showing the probability falling to 58.9% from 67.2% a day earlier.

"We need a mildly restrictive monetary policy, and the Fed likely has that now," Chicago Fed President Anna Paulson said, adding that "inflation is too high; we want to bring it down."

Meanwhile, Lower Oil prices could also take pressure off the Bank of Canada (BoC). The central bank previously warned that persistently high energy costs could require consecutive rate hikes.

Looking ahead, traders await labour market data from both the United States and Canada. US JOLTS Job Openings are due on Tuesday, followed by ADP Employment Change on Wednesday, while US Nonfarm Payrolls and Canadian employment figures will be released on Friday.

BNY’s Geoff Yu highlights ongoing market focus on Japanese Yen intervention, noting authorities stepped back from action overnight as Tokyo seeks to preserve its International Monetary Fund (IMF) free‑floating status. He explains Scott Bessent’s call for the Federal Reserve (Fed) to expand the FIMA Repo Facility to give Japan more US Dollar (USD) liquidity for FX operations without selling Treasuries, aiming to bolster intervention firepower while limiting market disruption.

Authorities weigh JPY support tools

"The market is continuing to focus on JPY intervention prospects, and it appears that both U.S. and Japanese authorities stepped aside from market action overnight."

"Tokyo seems intent on avoiding losing its IMF classification as a “free-floating exchange rate regime,” which would limit the country’s ability to intervene in a fourth trading session."

"Our data show that intervention days have generated some of the biggest volume sessions YTD."

"Although the “surprise” element during the first period of intervention generated the strongest price action in USD/JPY and JPY crosses, stronger volumes can help reinforce current price action."

"The challenge, however, is that event risk tends to be positive for JPY and negate intervention efforts."

"U.S. Treasury Secretary Scott Bessent wants the Fed to expand its FIMA Repo Facility, giving Japan greater access to dollars against its Treasury holdings."

"Tokyo could then sell those dollars to buy yen without liquidating U.S. bonds."

"Liquidity can sharpen the signal, but lasting success will still require monetary and fiscal fundamentals to cooperate."

"The facility, which allows accountholders to monetize their Treasury holdings as repo collateral, would enable Japan to access dollars without selling its Treasury holdings."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)