Australian Dollar Outlook: AUD/USD Rally Meets ISM, NFP and DXY Support
By Matt Simpson | Date: Sun, 02 Aug 2026
Overview
The Australian dollar (AUD) begins the week on a four-week winning streak, buoyed by a broad weakness in the US dollar following the Federal Open Market Committee (FOMC) meeting and coordinated interventions in the yen market. However, the upcoming US ISM and nonfarm payrolls (NFP) reports could significantly influence the AUD/USD exchange rate.
AUD/USD Rally Meets DXY Support
The AUD has largely avoided the volatility that affected the Japanese yen recently, which saw significant fluctuations due to Bank of Japan (BOJ) interventions. Meanwhile, expectations for a rate hike from the Reserve Bank of Australia (RBA) have diminished following a softer-than-expected Consumer Price Index (CPI) report, with markets now pricing in a minimal chance of a rate increase in September.
Economic Data and Events for AUD/USD Traders
This week’s key economic events include the nonfarm payrolls and ISM reports, which are critical for shaping Federal Reserve policy expectations. Recent trends show a slowdown in job growth, which could impact the likelihood of further rate hikes. The current market sentiment indicates a 74% probability of a September hike and a 41% chance of another in December.
AUD/USD Technical Analysis
The AUD/USD remains inversely correlated with the US dollar index (DXY), with a strong negative correlation of -0.86. The Australian dollar also shows positive correlations with the New Zealand dollar, copper, and the Chinese yuan, indicating the importance of sentiment in these markets. The S&P 500 has also shown a strong positive correlation, while WTI crude oil prices have recently exerted downward pressure on the AUD.
Futures Positioning and Market Sentiment
Despite the AUD's recent gains, large speculators have increased their short positions, indicating a bearish sentiment. However, asset managers have also raised their long positions, suggesting a mixed outlook. The Commitment of Traders (COT) report indicates a significant increase in long positions among asset managers, which could support further AUD strength.
Options and Volatility Analysis
The recent decline in the US dollar index has provided additional support for the AUD/USD pair. However, the US dollar is currently testing key support levels, which could limit the upside potential for the AUD. The risk reversals indicate increasing demand for call options, suggesting a bullish sentiment among traders.
Conclusion
The outlook for AUD/USD this week hinges on the upcoming economic data releases. A combination of weaker-than-expected US economic data and continued interventions in the yen market could provide the necessary support for the AUD to extend its gains. Conversely, strong US data could bolster the dollar and limit the AUD's upside potential.