The AUD/USD pair tumbles to near 0.6980 during the early European session on Tuesday, pressured by escalating tensions in the Middle East. US President Donald Trump said on Monday that he will postpone his deadline for Iran to reopen the Strait of Hormuz by five days. He further stated that the US held ‘productive conversations’ with Tehran, but Iran denied it had any dialogue with Washington. Signs of a prolonged conflict between the US and Iran could boost a safe-haven currency such as the US Dollar (USD) and create a headwind for the pair.
On the other hand, a hawkish stance from the Reserve Bank of Australia (RBA) might help limit the Aussie’s losses. The Australian central bank raised its Official Cash Rate (OCR) by 25 basis points (bps) to 4.10% at its March meeting last week. This marks the second consecutive rate hike of the year, following a 25 bps increase in February.
Technical Analysis:
In the daily chart, the near-term bias of AUD/USD turns mildly bearish after the pair slipped back from the 0.71 area and lost the upper hand it had above the upper Bollinger Band, with price now tracking under the 20-day middle band near 0.7070. The Bollinger Bands have flattened and started to contract after the recent expansion, signaling fading upside momentum and a transition into a corrective phase. The RSI has retreated from overbought territory toward the mid-40s, confirming easing bullish pressure and favoring a downside bias while below the recent highs.
Initial resistance now stands at 0.7065, aligning with the Bollinger middle band and capping rebounds ahead of a stronger barrier at 0.7100, where recent closing highs cluster. A daily close above 0.7100 would reopen the topside toward 0.7150 and reassert the broader uptrend. On the downside, immediate support emerges at 0.6920, followed by 0.6880, where prior reaction lows coincide with the rising 100-day exponential moving average around 0.6860 to form a support zone. A break beneath this area would expose deeper retracement toward 0.6800 and undermine the broader bullish structure established over previous weeks.
(The technical analysis of this story was written with the help of an AI tool.)
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022.
Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
Source: https://www.fxstreet.com/news/aud-usd-price-forecast-tumbles-below-07000-bearish-technical-signals-emerge-202603240654
