AUD/USD weakens as Trump-driven risk aversion boosts US Dollar

• Safe-haven demand lifts USD after President Trump warns of potential action against Iran’s energy infrastructure.
• RBA expected to hold rates but maintain a hawkish bias, keeping tightening expectations alive.
• Fed stays on hold with a cautious, data-dependent stance.

The AUD/USD pair is trading with a bearish bias around the 0.6850 region on Monday, as markets react to fresh geopolitical developments and central bank expectations.

United States (US) President Donald Trump dominated headlines over the weekend after warning that the US could target Iran’s energy infrastructure if Iran doesn't agree to a ceasefire on Washington's terms. The comments boosted the US Dollar (USD) due to risk aversion.

The Reserve Bank of Australia (RBA) is preparing for its next meeting with a cautious yet hawkish outlook. Inflation in Australia remains above the target and has proved more persistent than expected. Policymakers have emphasized that price pressures were already high before the recent spike in global energy prices, indicating that risks remain tilted to the upside.

Markets largely expect the RBA to hold rates unchanged at the upcoming meeting. The central bank is unlikely to signal any imminent easing and is instead expected to keep the door open for further tightening if inflation fails to moderate.

In contrast, the Federal Reserve (Fed) adopted a more cautious stance at its latest meeting, opting to leave interest rates unchanged while emphasizing a data-dependent approach going forward. Officials acknowledged that inflation remains above target and flagged that rising Oil prices could complicate disinflation. However, the Fed refrained from signaling additional rate hikes, instead focusing on the need for greater confidence that inflation is sustainably moving lower before considering any policy adjustment.

Short-term technical analysis:

On the 4-hour chart, AUD/USD trades at 0.6853. The near-term bias is mildly bearish as the pair holds below both the 20-period and 100-period Simple Moving Averages (SMAs), which continue to slope lower and cap recovery attempts. Price has been making lower highs and pressing into a tight consolidation near the recent troughs, underscoring persistent selling pressure. The Relative Strength Index (RSI) hovers below 30, signaling oversold conditions that could slow immediate downside but do not yet show a decisive momentum reversal.

Immediate resistance stands at 0.6866, where prior horizontal rejection aligns just above spot and marks the first level sellers would defend on any bounce. A break above that area would expose the descending 20-period SMA near 0.6900 as the next hurdle. On the downside, initial support is seen at 0.6852, followed by 0.6848, with a stronger floor emerging at 0.6834; a clear drop through this support cluster would open the way for a deeper extension of the current downtrend.

(The technical analysis of this story was written with the help of an AI tool.)