Key Moments
- AUD/USD trades just above the mid-0.7100 area after touching a one-and-a-half-week low near 0.7140, down about 0.25% on the day.
- US inflation data and Middle East tensions support the US Dollar, while hawkish RBA expectations help contain downside pressure on the Aussie.
- Technical signals point to a bearish bias, with focus on the 23.6% Fibonacci level at 0.7150 and potential downside targets at 0.7095 and 0.7051.
Fundamental Drivers
The AUD/USD pair starts the new week under pressure, weighed by renewed strength in the US Dollar as markets react to geopolitical concerns and expectations for higher US interest rates. During the Asian session on Monday, the pair slipped to a one-and-a-half-week low around the 0.7140 region before stabilizing. It is currently trading slightly above the mid-0.7100s, registering a decline of nearly 0.25% for the session.
US inflation data released last week reinforced market expectations that the US Federal Reserve will deliver an interest rate increase later this week. This, combined with heightened geopolitical tensions linked to the US-Iran standoff and clashes in the Strait of Hormuz, is supporting demand for the safe-haven US Dollar. These factors are exerting downward pressure on AUD/USD.
At the same time, expectations for a hawkish stance from the Reserve Bank of Australia are providing a counterbalance, helping to cushion the Australian Dollar and preventing a more pronounced slide in the pair.
Technical Outlook for AUD/USD
From a technical standpoint, the decisive move last week below the 100-period Simple Moving Average (SMA) on the 4-hour chart has been a key catalyst for sellers in AUD/USD. That breakdown has reinforced the bearish tone in the short term.
Even so, the subsequent decline has shown some firmness just under the 23.6% Fibonacci retracement level at 0.7150. This resilience suggests that traders should exercise caution before aggressively positioning for additional downside. The Relative Strength Index (RSI) hovering near 30 indicates that the pair is approaching oversold territory, which could dampen the pace of further losses rather than spark an immediate bullish reversal.
The Moving Average Convergence Divergence (MACD) indicator remains in negative territory, highlighting that downside momentum is still present, even if it appears to be fading somewhat in the latest leg lower.
Key Levels: Support and Resistance
If the pair establishes clear acceptance below the 23.6% Fibonacci retracement at 0.7150, technicals suggest room for a deeper pullback. In that scenario, traders will be watching the next Fibonacci levels as potential downside targets:
| Level Type | Price | Comment |
|---|---|---|
| 23.6% Fibonacci retracement | 0.7150 | Near-term support currently showing resilience |
| 38.2% Fibonacci retracement | 0.7095 | First deeper support zone if selling intensifies |
| 50% Fibonacci retracement | 0.7051 | Stronger demand area on further downside |
| 100-period SMA (4-hour) | 0.7179 | Immediate upside resistance |
| Recent cycle high | 0.7239 | Next resistance; break needed to ease bearish bias |
The zones near the 38.2% retracement at 0.7095 and the 50% retracement at 0.7051 are viewed as progressively stronger areas of demand should downside pressure resume.
On the upside, initial resistance is located at the 100-period SMA on the 4-hour chart, currently around 0.7179. Above that, a more significant barrier is seen at the recent cycle high close to 0.7239. Only a sustained move through this upper boundary would meaningfully relieve the current bearish tone in AUD/USD.
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