AUD/USD Holds Near 0.7090 as RBA, Geopolitics Drive

Key Moments

RBA Policy Support Lifts Australian Dollar

AUD/USD is trading slightly higher near 0.7090 in early European dealings on Friday, as the Australian Dollar (AUD) edges up against the US Dollar (USD). The move follows the Reserve Bank of Australia’s recent policy tightening, which has helped underpin the currency pair.

At its March meeting on Tuesday, the RBA increased its Official Cash Rate (OCR) by 25 basis points to 4.10%. This was the second successive rate rise of the year, coming after a 25 basis point hike in February. The central bank’s stance has been described as hawkish in the current context.

Stronger-than-expected employment gains in Australia and an unchanged Unemployment Rate for February have bolstered the RBA’s assessment that the domestic economy can endure higher borrowing costs. This backdrop is providing support to the Australian Dollar and, in turn, has been a tailwind for AUD/USD.

Geopolitical Risks and Safe-Haven Flows

Developments in the conflict involving the United States, Israel, and Iran present a potential counterweight to AUD strength. Heightened tensions could steer market participants toward traditional safe-haven assets, including the US Dollar.

Israeli Prime Minister Benjamin Netanyahu stated on Thursday that Israel “acted alone” in a strike on Iran’s South Pars, described as the world’s largest gas field. In response, Iran has launched missile and drone attacks targeting Israel and US bases in the region, as well as energy infrastructure in Qatar, Saudi Arabia, and the United Arab Emirates (UAE).

These geopolitical dynamics may influence broader risk sentiment and could increase demand for the USD, affecting the near-term trajectory of AUD/USD.

Technical Picture: Neutral Bias with Mild Bullish Tilt

On the daily chart, AUD/USD is exhibiting a neutral profile with a slight bullish inclination. The pair is consolidating just above the upper half of its recent Bollinger Band range while remaining comfortably above the rising 100-day exponential moving average, which is positioned near 0.6860.

The upper Bollinger Band is flattening after a preceding phase of expansion, pointing to diminishing upside momentum but not yet signaling a clear reversal. The Relative Strength Index (RSI) has retreated toward the mid-50s from previously overbought levels, indicating that the prior bullish impulse is fading, although selling pressure has not taken control.

Key Levels to Watch

Market participants are closely monitoring the following technical levels as potential inflection points for AUD/USD.

Immediate support is identified around 0.7050, where an intraday swing zone converges with the middle section of the Bollinger Band setup. Below that, stronger support is located near 0.7000. A decisive move under these areas would bring the 0.6920–0.6900 band into view as the next downside target, aligning more closely with the 100-day exponential moving average.

On the upside, initial resistance is situated at 0.7125, corresponding to recent closing highs and lying just under the upper Bollinger Band. The next resistance level is near 0.7150. A daily close above 0.7150 would reopen the topside and solidify the bullish scenario toward the 0.7200 area.

(The technical analysis of this story was written with the help of an AI tool.)

Australian Dollar: Key Fundamental Drivers

The Australian Dollar’s performance is influenced by several structural and cyclical drivers that are closely monitored by market participants.

Role of the Reserve Bank of Australia

One of the primary factors shaping the value of the Australian Dollar is the level of interest rates set by the Reserve Bank of Australia. The RBA determines the rate at which Australian banks can lend to one another, which then filters through to broader borrowing costs across the economy.

The central bank’s main objective is to maintain inflation within a 2-3% range by adjusting rates higher or lower. When interest rates in Australia are relatively elevated compared with other major central banks, this generally supports the AUD; comparatively lower rates tend to weigh on the currency. In addition to rate moves, the RBA can apply quantitative easing or tightening to influence credit conditions, with easing typically seen as AUD-negative and tightening viewed as AUD-positive.

China, Commodities, and Trade Balance

Because Australia is a resource-rich economy, commodity prices are another major input into AUD performance, with Iron Ore being especially important as a key export. When Iron Ore prices rise, demand for Australian exports tends to strengthen, which can lift the AUD. A decline in prices usually has the opposite effect. Higher Iron Ore prices also often support a more favorable Trade Balance for Australia.

China’s economic health is a critical component of this equation. As Australia’s largest trading partner, Chinese demand for raw materials, goods, and services has a direct impact on Australian export volumes. Strong Chinese growth generally increases demand for Australian exports and can boost the AUD, while weaker-than-expected Chinese activity can depress the currency. Surprises in Chinese growth data frequently spill over into Australian Dollar moves.

The Trade Balance itself – the difference between export earnings and import payments – also plays a role. A positive Trade Balance, where export revenues exceed the cost of imports, supports the AUD through net foreign demand for Australian goods and services. Conversely, a negative Trade Balance can exert downward pressure on the currency.

Risk Sentiment and Market Positioning

Global risk appetite is another important driver for the Australian Dollar. In “risk-on” environments, when investors show a preference for higher-yielding or growth-sensitive assets, the AUD typically benefits. During “risk-off” periods, when markets favor safe-haven assets, the currency often faces headwinds.