The AUD/USD remains under pressure as investors and traders digest a flare up in tensions between the United States and Iran, a development that could dent appetite for risk-on currencies like the Aussie. This week, attention will turn to crucial readings on U.S. inflation and retail sales, data that could influence the pair’s next directional move.
Geopolitical Risks Remain in Focus
The AUD/USD’s short-term momentum is likely to remain under pressure from escalating tensions in the Middle East. Throughout Monday, the pair continued to retreat following U.S. President Donald Trump declaring that the US will be “taking over” the Strait of Hormuz and added that he will reinstate the Iranian blockade and impose 20 per cent charge on cargo ships passing through the critical waterway. Tensions have flared between the two countries over the past week, with Washington and Tehran accusing each other of breaching the delicate ceasefire agreement reached last month.
Investors typically flock to the U.S. Dollar for its safe-heaven status during times of geopolitical uncertainty, which also weakens currencies like the Aussie, viewed by traders as a proxy for risk-on sentiment.
AUD/USD Technical Analysis — 1hr Chart
Since bottoming on June 30, the AUD/USD has trended cautiously higher before its recent retracement this week. In a win for the bulls, the 50-period moving average (MA) crossed back above the 200 MA earlier this month, a technical signal suggesting higher prices. However, more recently, the pair’s price has broken below an uptrend line that stretches back to last month’s low, potentially setting the stage for further declines.
Key Support Levels to Monitor
If the pair continues to trend lower from current levels, it’s initially worth monitoring the 0.6905 area. Investors would likely pay close attention to this location because it sits near a key horizontal trendline that connects the July 8 low with a series of corresponding price action throughout late June.
Selling below this level may bring lower support around 0.6885 into play. Traders could look for entry points in this region near multiple troughs that formed on the chart between late June and early July.
Crucial Resistance Levels to Watch
A decisive rebound higher back above the uptrend line could see the AUD/USD make a move toward the 0.6945 level. This area could attract selling pressure near a crucial horizontal line that links several swing highs that have emerged on the chart this month with a brief pause in the pair’s impulsive move lower in late June.
Bullish price action above this area may propel a move toward 0.6960. Traders who have taken positions during the currency pair’s recent pullback could look for profit-taking opportunities in this region near a minor late June countertrend bounce, which also closely aligns with three prominent peaks positioned around this month’s high.
AUD/USD Price Chart
Must Watch Events on the Economic Calendar This Week
Looking at key events on the economic calendar this week, traders will pay close attention to key U.S. inflation and retails sales data. Firstly, the U.S. Bureau of Labor Statistics releases its June CPI print on Tuesday, with key PPI data to follow on Wednesday. Investors will then get a read on the health of consumer spending on Thursday when the U.S. Census Bureau unveils retail sales data for last month.
Given economists’ uncertain outlook on the direction of interest rates and a Federal Reserve that has committed to placing more emphasis on economic data, the AUD/USD may see a strong directional move if these numbers significantly deviate from expectations and shed more light on future U.S. interest rate policy settings. Particularly, a higher-than-anticipated CPI reading could place further downward pressure on the AUD/USD after Federal Reserve Governor Christopher Waller cautioned Monday that a hot core inflation reading this week could prompt near-term rate tightening.
My Take on the AUD/USD
I expect the AUD/USD to decline further this week because of the recent technical breakdown below an established uptrend line and a heightened chance that U.S. inflation readings will come in above expectations, given prices throughout June were exposed to energy shocks arising from the Middle East conflict and ongoing significant AI investment.
Ready to trade our AUD/USD analysis? Here is our list of the best Forex brokers worth checking out.
