AUD/USD slides below 0.7000 as tensions lift dollar

Key Moments

AUD/USD traded near 0.6980 in early European trading on Tuesday. The pair fell 0.45% on the day.
Meanwhile, rising tensions in the Middle East boosted demand for the US Dollar as a safe-haven.
Key levels include resistance at 0.7065 and 0.7100. Support stands at 0.6920 and 0.6880.

Risk Aversion Weighs on the Aussie

AUD/USD fell toward 0.6980 in early European trading on Tuesday. The pair extended losses and dropped 0.45% on the day. This decline followed rising tensions in the Middle East. As a result, demand for the US Dollar (USD) increased as investors sought safety.

On Monday, US President Donald Trump said he would delay his deadline for Iran to reopen the Strait of Hormuz by five days. He also noted that the US held “productive conversations” with Tehran. However, Iran denied any talks with Washington. Consequently, markets see ongoing tensions between the US and Iran. This, in turn, supports safe-haven flows into the USD and pressures AUD/USD.

RBA Tightening Offers Partial Support

However, losses in the Australian Dollar (AUD) remain limited. The Reserve Bank of Australia (RBA) maintains a firm policy stance. The central bank raised its Official Cash Rate (OCR) by 25 basis points to 4.10% at its March meeting.

Previously, the RBA also delivered a 25 basis point hike in February. This marked its second consecutive increase this year. As a result, the tightening cycle helps support the AUD. Even so, global risk sentiment continues to favor the USD.

Technical Picture Turns Cautiously Bearish

On the daily chart, the outlook for AUD/USD has turned mildly bearish. The pair pulled back after failing near the 0.71 level. Earlier, it traded above the upper Bollinger Band. Now, it has moved below the 20-day middle band near 0.7070.

At the same time, Bollinger Bands have started to flatten and narrow. This shift signals weaker momentum and a possible correction phase. In addition, the Relative Strength Index (RSI) has dropped from overbought levels into the mid-40s. Therefore, bullish pressure has eased, and short-term bias now leans lower.

Key Levels: Resistance and Support

Traders are closely watching key levels as AUD/USD stays below 0.7000.

Type	Level	Comment
Immediate resistance	0.7065	Near the Bollinger middle band; caps short-term rebounds
Stronger resistance	0.7100	Recent highs; a break may open the path to 0.7150
Upside target	0.7150	Next objective if 0.7100 breaks
Initial support	0.6920	First downside level to watch
Next support	0.6880	Near prior lows and the 100-day EMA
Support zone	0.6860	100-day EMA reinforces this area
Deeper target	0.6800	Next level if support breaks

First, resistance stands at 0.7065. This level aligns with the 20-day middle band and limits rebounds. Above that, stronger resistance appears at 0.7100. A daily close above this level could open the way to 0.7150. It would also signal renewed bullish momentum.

On the downside, support starts at 0.6920. Below that, 0.6880 becomes key. This level aligns with prior lows and the 100-day EMA near 0.6860. Together, they form a strong support zone. If price breaks below it, the pair may fall toward 0.6800.

Background: US Dollar and Fed Policy

The US Dollar (USD) is the official currency of the United States. It also serves as a global reserve currency. In fact, it accounts for over 88% of global FX turnover.

After World War II, the USD replaced the British Pound as the main reserve currency. Initially, it was backed by gold. However, the Bretton Woods system ended in 1971.

Federal Reserve Policy and the Dollar

The Federal Reserve (Fed) sets US monetary policy. It aims to control inflation and support employment. Its main tool is interest rates.

When inflation rises above 2%, the Fed often raises rates. This tends to support the USD. In contrast, when inflation falls or unemployment rises, the Fed may cut rates. This usually weakens the Dollar.

Quantitative Easing and Quantitative Tightening

In extreme cases, the Fed uses additional tools. One of them is quantitative easing (QE). This policy increases liquidity in the financial system.

QE involves buying government bonds. As a result, it injects money into the economy. This often weakens the USD. In contrast, quantitative tightening (QT) reduces liquidity. Therefore, it usually supports the Dollar.