AUD/USD Already Found Its Floor — the Real Setup Is at 0.70, Not the Old Support Story

The headline that AUD/USD is "nearing an important support area" is yesterday's news. The pair already tested that support, held, and bounced. As of August 6, AUD/USD was trading around 0.7035, having recovered from a July low of roughly 0.6884 and pushing to a seven-week high near 0.71. The support story was written in June. The question now is what to do with the recovery — and whether a better entry might be closer than the rally suggests.

The June selloff was arguably overdone

AUD/USD fell below 0.69 in June, hitting a 5.4% correction from its May high near 0.7250. That dip lined up with two major technical anchors: the 200-day moving average and the March low, both clustering around 0.69. For context, the pair had started 2026 near 0.6680, rallied into the 0.71 range by February, peaked in May, and then got sold off back to the March floor. Selling into a confluence of the 200-day MA and a prior swing low, after a multi-month decline, is classic exhaustion territory.

The market punished the Australian dollar while ignoring data that didn't fit the narrative. Australia's goods trade balance unexpectedly swung to a surplus of A$1.9 billion in June, reversing a revised deficit of A$2.4 billion in May. Gold and iron ore exports drove the turnaround while imports cooled. The composite PMI was revised up to 53.2 in July, the highest reading since January, with services hitting a six-month high and manufacturing returning to growth. Household spending was stronger than expected. None of that screams "currency that needs to fall further." The selloff had more to do with short covering and USD momentum than with a deterioration in Australia's underlying economic picture.

The RBA dilemma — and why it hasn't weighed as much as it should

The Reserve Bank of Australia holds the cash rate at 4.35%, having hiked three times this year. Its next meeting is August 11. Goldman Sachs has abandoned its forecast for another RBA hike, citing softer inflation — the trimmed mean annual rate came in at 3.65% versus a forecast of 3.76%. Goldman now expects the RBA to hold through 2026 and begin gradual cuts in 2027, targeting 3.60% by mid-year.

That dovish pivot should, in theory, pressure the AUD. But it hasn't moved the pair off its feet. The reason is the USD side of the equation. Dollar weakness from Middle East de-escalation — specifically the Iran-Oman shipping corridor agreement through the Strait of Hormuz — has broadened across Asian currencies, and the AUD has caught that tailwind. When the denominator in an exchange rate is weakening, the numerator doesn't need to do much to rally. The AUD hasn't led this recovery on domestic policy strength. It's been pulled up by USD weakness and improving risk sentiment. That distinction matters for durability.

The current support question isn't "where" — it's "how deep"

With the pair trading near 0.7035, the 0.70 level is the psychological support that traders are watching right now. Below that, the 0.6950–0.6960 zone served as a consolidation area in late July and would be the next structural support. The 0.69 level — the March low and 200-day MA — remains the major support floor that held in June.

The technical posture has shifted. Short-term momentum shows a sequence of higher highs and higher lows since the July trough. A sustained hold above 0.70 keeps focus on 0.7050 and then the 0.71–0.72 resistance zone. A breakout above 0.72 would argue that the broader June-July recovery is extending toward the May highs. But the sharp rally from 0.6884 to 0.71 in roughly two weeks raises the possibility of near-term profit-taking, especially with the RBA meeting on August 11 introducing binary event risk.

I don't think investors need to chase the rally here. The setup remains constructive, but the better risk/reward is likely on a pullback toward 0.6950–0.6960, or a retest of 0.69 if the RBA delivers a dovish surprise. Those levels offered a clean entry after the June exhaustion. They'd likely offer one again if price returns.

The broader case

Over the past 12 months, AUD/USD has gained roughly 7.8% to 8.4%. Over the past month, it's up 1.5%. The six-month average sits at 0.7052, meaning current price action is running roughly in line with where the pair has spent most of its time. The pair is well below the May high of 0.7250, which means upside room exists if the secular drivers — commodity export strength, US dollar normalization, and global risk appetite — continue to align.

But the near-term picture is a recovery that needs to prove itself. The June selloff into 0.69 was arguably a mispricing event, not a fundamental break. The trade data and PMI print support the idea that the AUD had more resilience than the chart suggested. The USD tailwind from geopolitical de-escalation is real but may not be permanent if energy markets re-price conflicts. And the RBA's policy trajectory — holding steady now with potential cuts in 2027 — removes one of the traditional supports for the Australian dollar.

What to do

For those who bought near 0.69 in June or early July, the thesis is intact. Holding above 0.70 preserves the recovery structure. A target of 0.7050 is the next technical step, with 0.71–0.72 as the zone that would confirm broader bullish continuation.

For those looking to enter, the rally to 0.71 after a two-week run is not the optimal entry. The market has arguably baked in a modest amount of USD weakness optimism already. A pullback to 0.6950–0.6960, or a retest of the 0.69 floor, would offer a tighter risk/reward. That's where the 200-day moving average and the March low provided support last time. If price returns there, the June exhaustion setup may repeat.

I'd reassess the bullish posture if AUD/USD breaks below 0.69 on conviction — a close below that level with follow-through would invalidate the idea that the June dip was a buying opportunity and point toward deeper correction. Until then, the recovery from the oversold zone looks like a constructive trend that just needs a better entry point.

Don't let the "nearing support" headlines trick you into buying at 0.71 when 0.6950 might be waiting.