AUD/USD stalls below 0.7100 as ceasefire euphoria fades
- AUD/USD surged over 1% on Wednesday after the US and Iran struck a last-minute ceasefire, but gains stalled below 0.7100.
- Australian economic data is largely absent for the rest of the week, leaving Thursday's US PCE and Friday's CPI in the driver's seat.
AUD/USD gave back a portion of Wednesday's sharp rally, settling around 0.7050 after surging over 1% earlier in the session. The pair spiked to a three-week high near 0.7085 on news of a two-week ceasefire between the US and Iran, but momentum faded quickly as markets questioned the durability of the deal, with price pulling back into a tight range of small-bodied candles heading into the Asian open.
The ceasefire, which includes an agreement by Iran to reopen the Strait of Hormuz, initially crushed safe-haven demand for the US Dollar and sent risk-sensitive currencies sharply higher. However, the deal is already proving tenuous; reports suggest neither side has committed to the underlying 10-point framework, and traders are treating the two-week window as a countdown rather than a resolution. On the Australian Dollar side, the domestic calendar is functionally empty for the remainder of the week. The Reserve Bank of Australia (RBA) hiked the cash rate by 25 basis points to 4.10% at its March meeting, and markets are pricing the possibility of further tightening at the May decision as elevated energy costs keep inflation pressures alive.
With no local data to trade, attention shifts entirely to the US: Thursday brings the core Personal Consumption Expenditures (PCE) Price Index for February and fourth-quarter Gross Domestic Product (GDP), while Friday delivers March Consumer Price Index (CPI) data alongside the University of Michigan (UoM) consumer sentiment and inflation expectations surveys.
AUD/USD 15-minute chart
Technical Analysis
In the fifteen-minute chart, AUD/USD trades at 0.7047. The pair holds above the 200-period Exponential Moving Average (EMA) at 0.7005, which suggests a mildly bullish intraday bias as price respects this underlying dynamic support. The Stochastic RSI near 71 hints at firm but increasingly stretched upside momentum, leaving room for consolidation or a shallow pullback while the price action stays supported above the 200-EMA.
On the downside, immediate support is seen at the 200-period EMA around 0.7005, where buyers would be expected to defend the short-term uptrend if a corrective dip unfolds. As long as AUD/USD remains above this level, the near-term structure favors further recovery attempts, with any pause likely to develop as sideways consolidation rather than a deeper reversal in the very short term.
(The technical analysis of this story was written with the help of an AI tool.)
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
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