Australian Dollar gains as Treasury buyback offsets hawkish Fed

The Australian Dollar experienced a surge on Wednesday, climbing more than 0.56% as the US Dollar faced losses due to Treasury bond buyback and the release of Federal Reserve minutes from the July meeting, which contained a hawkish tone. The AUD/USD rate is now at 0.7127. The Treasury chose to purchase long-end bonds to address elevated yields, reflecting concerns over the situation since the start of the US-Iran war, during which energy prices have stayed high due to hostilities threatening global oil production.

The US Treasury's program is scheduled to run from September 9 to November 4, during which time the purchases of long-end bonds will be doubled from 2 billion to at least 4 billion. Meanwhile, the Federal Reserve disclosed its July meeting minutes, indicating policymakers' worries about inflation, and some considering that tightening policy may become necessary if inflation does not subside.

Fed Chair Kevin Warsh inquired if the Federal Reserve should hold six meetings, providing two months for data review. Investors are currently monitoring Warsh's upcoming speech at the Jackson Hole Symposium at the end of August, which typically outlines the Fed's outlook on interest rates for the second half of the year. In Australia, traders are also awaiting the release of employment data for July, which is forecasted to show a deceleration in job losses, from 76.3K in June to 15K in July, with the Unemployment Rate remaining steady at 4.4%.

In the US, the economic agenda will include Initial Jobless Claims, a speech by St. Louis Fed President Alberto Musalem, and S&P Global Flash PMIs. On the daily chart, AUD/USD trades at 0.7127, breaking through a cluster of demand defined by the simple moving average triple (SMA) at 0.6996 and a nearer rising trend-line floor around 0.6967.

This placement above these supports suggests a constructive near-term outlook, while the Relative Strength Index (14) at 66 indicates strong but progressively stretched bullish momentum as the pair approaches the upper boundary of a broader ascending structure. Potential resistance on the upside is found in the 0.7297–0.7309 band, where overlapping upward trend lines could impede further gains before higher barriers emerge toward 0.8433 and 0.9150.

Support on the downside is located at the recent breakout area around 0.7127, with additional support at the short-term rising trend-line around 0.6967 and the group of simple moving averages at 0.6996. The earlier downtrend-line break at 0.6399 represents a deeper structural support if a more significant correction occurs.