The AUD/USD currency pair advanced on Monday, supported by a softer US Dollar and expectations of further monetary tightening by the Reserve Bank of Australia (RBA) [1]. The pair traded around 0.7176 at the time of reporting, rebounding from an earlier low near 0.7116 after opening the week with a bearish gap [1]. The US Dollar Index (DXY) hovered near 98.00, having touched a high of 98.49 earlier in the session [1].
Market sentiment was influenced by ongoing US-Iran tensions around the Strait of Hormuz, though cautious optimism regarding a potential deal continued to weigh on the US Dollar and support the risk-sensitive Australian Dollar [1]. The current two-week truce is set to expire on Wednesday, with markets anticipating a possible second round of peace talks in Pakistan, although Iran has not yet confirmed its participation [1]. Elevated oil prices are contributing to inflation concerns, reinforcing expectations that the Federal Reserve may delay rate cuts, while the RBA is anticipated to continue raising rates due to increased inflationary pressures [1].
Technical analysis indicates that AUD/USD maintains a bullish bias, trading well above the 20-day simple moving average (SMA) at 0.7008 and the lower Bollinger band at 0.6786, with the upper band near 0.7230 acting as the next resistance level [1]. The Relative Strength Index (RSI) stands at 65.48, suggesting persistent buying interest, while the MACD indicator remains positive, signaling ongoing bullish momentum [1]. Immediate resistance is seen at 0.7230, with support at 0.7008 and 0.6786 [1].
Overall, the AUD/USD pair is buoyed by a weaker US Dollar and expectations of further RBA tightening, though any escalation in US-Iran tensions could limit upside potential and support a rebound in the US Dollar [1].
CONCLUSION
AUD/USD is currently supported by a softer US Dollar and expectations of further rate hikes from the RBA, with technical indicators pointing to sustained bullish momentum. However, geopolitical risks and elevated oil prices may influence future movements, and any escalation in US-Iran tensions could cap gains for the Australian Dollar.