The AUD/USD currency pair turned lower after a modest uptick during the Asian session on Tuesday, with traders awaiting a decisive break below the 0.7100 mark before extending the previous day's retracement from the highest level since June 5 [1]. The US Dollar (USD) gained positive traction, recovering from a two-month low reached on Monday, as inflation concerns driven by higher oil prices kept expectations for at least one US Federal Reserve (Fed) interest rate hike alive [1]. Geopolitical risks also contributed to USD strength, with President Donald Trump stating that the US would not seek an extension of the Memorandum of Understanding (MoU) with Iran, which expired on Monday. Trump further suggested declaring the Strait of Hormuz as US territory and warned of targeting Oman if it hindered actions to reopen the strategic waterway. Meanwhile, Iran-backed Houthi rebels in Yemen escalated their campaign against Saudi Arabia, pushing oil prices to a two-week high [1].
Investors are concerned that rising energy prices could reignite inflationary pressures, potentially prompting the Fed to adopt a more hawkish stance. However, USD bulls may wait for additional cues regarding the Fed's policy path, with attention focused on the upcoming release of FOMC Minutes scheduled for Wednesday [1]. On the Australian side, the Reserve Bank of Australia's (RBA) hawkish outlook could provide support for the AUD and the AUD/USD pair. Rabobank strategists noted that Governor Bullock moved quickly to counter the market’s initial dovish interpretation of the RBA’s latest decision, emphasizing that the Board had actively considered both holding and raising rates. Bullock underscored the ongoing tightening bias, stating that another rate increase remains 'quite possible' [1].
Technical analysis shows the AUD/USD pair maintains a constructive bullish tone above the 100-day Simple Moving Average (SMA) at 0.7063 and the 200-day SMA at 0.6943. The pair is also trading above the 50.0% Fibonacci retracement of the May-June decline at 0.7068, indicating that the recent pullback is so far a correction within an ongoing advance. Immediate resistance is noted at the 61.8% Fibonacci retracement at 0.7116, with a stronger barrier at the 78.6% retracement at 0.7184, where upside momentum could be tested [1].
CONCLUSION
The AUD/USD pair is currently facing resistance near 0.7100, with market sentiment influenced by US Dollar recovery, geopolitical tensions, and inflation concerns. While the RBA's hawkish stance may support the Australian Dollar, traders are awaiting further signals from the Fed and the release of FOMC Minutes. Technical indicators suggest the pair remains in a bullish correction, but upside momentum will be tested at key resistance levels.