AUD/USD Rate Divergence Hinges on Sticky Inflation Ahead of Jobs Report

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The Australian dollar (AUD/USD) traded mostly sideways on Tuesday after retreating from its highest level since May late last week on Greenback strength following Federal Reserve Chair Kevin Warsh’s hawkish remarks at the Jackson Hole Symposium that pushed a possible U.S. rate hike back into focus. The question remains whether Friday’s sell-off in AUD/USD represents a pause in the pair’s recent bullish momentum or the start of a broader reversal. Traders will be able to better answer that question with reads later this week on Australian economic growth and the U.S. labor market.

AUD/USD Market Positioning Following Jackson Hole

Traders booked profits in the pair following Fed Chair Kevin Warsh’s keynote address at the Jackson Hole Symposium as bets for a possible hike this month shorted after he said the central bank “will have work to do,” if inflation doesn’t return to its target rate of 2%. Following Warsh’s hawkish remarks, the odds for a September interest rate increased to 65%, up from around 35% before his speech. The shift in U.S. rate expectations continues to see the Aussie dollar remain under pressure on the back of broader Greenback strength.

Domestic GDP and U.S. Jobs Report Next Catalysts

Looking ahead, traders will turn their attention on Wednesday to domestic second quarter gross domestic product (GDP), where economists expect the Australian economy to have grown just 0.3% in the period, broadly in line with the sluggish 0.3% outcome in the first quarter. However, a stronger-than-expected print could see the pair’s longer-term uptrend resume, especially after last week’s sticky domestic inflation numbers brought forward expectations of another Reserve Bank of Australia (RBA) rate hike this year. Conversely, a softer GDP print combined with a more hawkish Fed outlook on interest rates could act as a catalyst for a larger reversal.

Later this week, the pair could also see heighted volatility when the Labor Department releases the August jobs report. Traders will likely pay particular attention to the health of the U.S. labor market and asses what possible surprises could mean coupled with the Fed’s more hawkish rate outlook following Jackson Hole.

AUD/USD Technical Structure

After climbing to its highest level since mid-May, the AUD/USD sold off sharply late Friday following Warsh’s Jackson Hole address toward the respected 200 moving average (MA). Since then, the pair consolidated within a pennant on Monday before breaking out above the pattern in early trade Tuesday. However, the 50 MA continues to provide overhead selling pressure, indicating indecision between the bulls and bears.

Key Support Levels to Watch

A breakdown below the pennant pattern would confirm a bull trap and may trigger a lower move toward 0.7130. However, this area on the chart would likely provide support near the prominent August 17 and August 20 peaks.

Selling below this key level could see the pair fall to lower support around 0.7100. Traders may look to open long positions in this location near two minor troughs that formed on the chart earlier this month following two impulsive waves higher.

Vital Resistance Levels to Monitor

If the AUD/USD resumes its longer-term move higher, the first area of interest sits around 0.7185. Tactical traders who accumulated long positions during the recent sell-off may look for profit-taking opportunities in this region near the August 26 and August 27 peaks.

A decisive close above this price could see a retest of the important 0.7205 area. This location on the chart would likely attract significant attention near last week’s highs, prior to the pair’s Jackson Hole-driven sell-off.

AUD/USD Price Chart

AUD/USD Uptrend in Question After Shifting U.S. Rate Expectations

The AUD/USD’s longer-term uptrend remains in question as traders balance a more hawkish Fed following Jackson Hole against sticky domestic inflation that has increased bets of an RBA rate hike before the end of the year. Key readings this week on Australian quarterly economic growth the health of the U.S. labor market could set the stage for the pair’s next directional move.

Sources:

https://www.reuters.com/world/asia-pacific/dollar-near-two-week-high-warsh-boosts-rate-hike-bets-yen-slips-past-160-2026-08-31/

https://www.cnbc.com/2026/08/31/jackson-hole-fed-chair-kevin-warsh-hawkish-rate-hikes-analysts.html

https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html

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EURUSD Chart by TradingView