AUD under pressure as USD holds firm amid geopolitical shifts

The Australian Dollar (AUD) extended its losing streak for the second consecutive session on Tuesday, weighed down by a stronger US Dollar and persistent geopolitical uncertainty, despite a notable rebound in domestic consumer sentiment.

Data released earlier showed that Australia’s Westpac Consumer Confidence Index surged 5.7% in August to 98.5, its highest reading since February 2022. This marked a sharp improvement from July’s modest 0.6% gain, signaling that households may finally be emerging from a prolonged period of pessimism. However, analysts caution that sustaining this momentum could still require additional monetary easing, even though policymakers at the Reserve Bank of Australia (RBA) face no immediate pressure for further rate cuts after reducing rates by a cumulative 75 basis points since January.

Geopolitical drivers: Trump pushes peace talks and expands tariffs

The AUD/USD pair remained under pressure as the US Dollar benefited from renewed geopolitical developments. US President Donald Trump announced preparations for a trilateral meeting with Russian President Vladimir Putin and Ukrainian President Volodymyr Zelensky to explore potential security guarantees and even the possibility of territorial adjustments. The prospect of de-escalation in Eastern Europe boosted safe-haven flows into the Greenback while keeping the AUD on the defensive.

At the same time, Washington expanded its tariff program, raising duties on steel and aluminum imports by 50%, with new measures officially taking effect on August 18. The latest notice added 407 product codes to the US tariff schedule, while Trump hinted at further levies targeting semiconductors in the coming weeks. These moves have fueled trade-related uncertainty, reinforcing demand for the US Dollar.

US data and Fed expectations support USD

The US Dollar Index (DXY), which tracks the Greenback against six major currencies, rose for the second consecutive day and hovered near 98.20 at the time of writing. Investors are now eyeing the upcoming Jackson Hole Economic Symposium and a keynote speech by Federal Reserve Chair Jerome Powell for clarity on the central bank’s September policy stance.

Meanwhile, incoming US data has been mixed. Retail Sales rose by 0.5% in July, matching expectations but slowing from June’s upwardly revised 0.9%. The preliminary University of Michigan Consumer Sentiment Index dropped sharply to 58.6 in August, below both July’s 61.7 and market forecasts of 62.0, highlighting fragile household confidence. Inflation expectations, however, edged higher, with one-year projections rising to 4.9% and five-year projections climbing to 3.9%.

Adding to the narrative, US Treasury Secretary Scott Bessent suggested that the Fed should reduce short-term rates by as much as 150–175 basis points from current levels and even hinted at the possibility of a 50-basis-point cut in September. His comments reinforced market expectations of an aggressive easing path despite stronger-than-expected July retail figures.

AUD/USD technical outlook: Downside risks persist

From a technical perspective, AUD/USD trades just below the 0.6500 psychological handle, currently around 0.6490. The pair has slipped beneath the 9-day Exponential Moving Average (EMA), reflecting weakening short-term momentum. The 14-day Relative Strength Index (RSI) remains below the neutral 50 mark, confirming a bearish tilt.

Key support is seen near 0.6419, the two-month low recorded on August 1, followed by deeper support at 0.6372, the three-month trough from late June. A decisive break below these levels could expose the pair to further downside pressure.

On the flip side, the 0.6500–0.6503 zone remains a critical confluence area, marked by the 9-day EMA and the 50-day EMA. A sustained move above this barrier would improve short-term momentum, potentially targeting the August high at 0.6568, followed by the July peak at 0.6625 — the highest level in nine months.