The Australian dollar climbed against the US dollar in Monday’s Asian session, recovering from an early dip near 0.7115 and moving back into the mid‑0.7100 area. The rebound followed a brief pullback from Friday’s peak near 0.7220, the highest level since June 2022, and came despite an initially stronger US dollar on renewed tensions with Iran over the Strait of Hormuz.
Policy divergence drives Australian dollar gains
The latest advance extends a strong monthly run for the Australian dollar, which has gained 3.59% against the US dollar so far this month. It has also risen 3.66% versus the Japanese yen, making it the strongest major currency against the yen over the period, and has added 1.89% against the euro and 2.11% against the Canadian dollar.
The move reflects growing divergence in central bank expectations:
- The Reserve Bank of Australia (RBA) has lifted its cash rate to 4.10% in response to persistent inflation and a tight labour market.
- Australia’s unemployment rate held at 4.3% in March, underscoring domestic resilience.
- Annual inflation was 3.7% in February, above the RBA’s 2–3% target band, keeping the door open for further tightening.
Market pricing points to a high likelihood of additional RBA hikes, with some analysts projecting the policy rate could reach around 4.85% by mid‑August. This stance contrasts with a more cautious Federal Reserve.
Federal Reserve holds steady amid geopolitical risks
In the United States, the Federal Open Market Committee has left the federal funds rate in a 3.50–3.75% range. Officials have highlighted “substantial risks” and elevated uncertainty linked to the conflict in the Middle East and broader geopolitical tensions.
The US economy remains relatively resilient, with real GDP growth projected between 2.0% and 2.5% this year. However, the outlook for inflation is clouded by rising energy prices and instability around key oil shipping routes, limiting expectations for aggressive US tightening compared with the RBA.
Strait of Hormuz tensions temper US dollar strength
At the start of the week, the US dollar firmed as tensions between Washington and Tehran resurfaced around the Strait of Hormuz, a critical oil chokepoint. Disruptions to traffic there have fed global energy price swings and added to uncertainty over inflation and monetary policy.
A fragile ceasefire between the United States and Iran has provided some near‑term relief, prompting the US currency to ease back from a one‑week high and helping the Australian dollar recover. Market participants remain wary that any escalation could quickly shift sentiment again.
Technical picture supports upside bias in aud/usd
From a chart perspective, the Australian dollar’s move higher has reinforced a constructive short‑term outlook against the US dollar:
- The pair recently bounced from its 100‑day simple moving average (SMA), preserving the broader uptrend.
- Last week’s break above the 0.7115 area turned that former resistance into support, where buying interest re‑emerged on Monday.
Momentum indicators remain positive:
- The moving average convergence divergence (MACD) stays above its signal line in positive territory.
- The relative strength index (RSI) is holding near 62, signalling ongoing demand without yet flashing overbought conditions.
Key levels to watch
Traders are focusing on the following areas:
- Immediate resistance: around 0.7200, with a higher band at 0.7220–0.7225 marking this year’s peak. A clear and sustained break above 0.7225 would reinforce the uptrend that has been in place since late March.
- Near‑term support: around 0.7115, which underpins the present bullish structure. A drop below 0.7100 could open the door to a short‑term correction.
- Deeper support: near the 100‑day SMA around 0.6900, a zone that has repeatedly attracted buyers and may limit any extended pullback. Some traders also highlight 0.6955 as an intermediate support if 0.7100–0.7115 gives way.
Outlook ahead of rba meeting
Attention now turns to the RBA’s upcoming policy meeting on 5 May, seen as a key event for the Australian dollar’s next move. Any signal of further rate hikes or a tougher line on inflation is likely to reinforce the currency’s recent strength, especially if the Federal Reserve maintains its more cautious stance.
Traders will monitor whether AUD/USD can firmly clear the 0.7225 resistance band to confirm continuation of the rally, or whether a failure there and a fall back through the 0.7135–0.7115 support zone signals a period of consolidation or correction. Geopolitical developments around the Strait of Hormuz remain a major swing factor for the US dollar leg of the pair.
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