Australian Dollar wilts as Lebanon flare-up lifts the US Dollar

• Israel-Lebanon escalation stalls US-Iran talks, boosting crude prices.
• ISM Manufacturing tops forecasts, reinforcing US Dollar resilience.
• RBA hike bets fade as traders await Australian GDP.

The Australian Dollar loses traction and edges down 0.30% on Monday as risk appetite soured due to Iran halting negotiations with the US, as Israel intensified attacks in Lebanon. At the same time, data in the US revealed that business activity steadied, pushing the AUD/USD towards a two-day low of 0.7134.

AUD/USD slips as geopolitical jitters overshadow stronger US factory data

Geopolitics is driving the markets. Israel's aggression on Lebanon stalled US-Iran talks, sparking a reaction by the White House, with US President Donald Trump intervening to ease tensions between the two. Nevertheless, the markets pushed Oil prices higher, with WTI rising over 5%, with the barrel of petrol clearing the $92.00 barrier.

Higher crude prices pushed US Treasuries lower and lifted the Greenback. The US Dollar Index (DXY), which measures the buck’s performance against six currencies, edged up 0.24% at 99.18, a headwind for the AUD/USD pair.

ISM Manufacturing PMI beats, input prices ease

The US ISM Manufacturing PMI in May surprised to the upside, rising to 54.0 from 52.7 in April, while the prices paid sub-component decreased from 84.6 to 82.1.

Earlier, Fed Governor Jerome Powell said that the central bank will lose credibility if Trump removes officials over different views regarding monetary policy.

Looking ahead, attention shifts to JOLTS on Tuesday, then to ADP and ISM Services on Wednesday, with the important Nonfarm Payrolls report scheduled for Friday.

The Australian Dollar has retreated from around-yearly highs of 0.7277 on weaker jobs data and a slight dip in inflation, after the Reserve Bank of Australia (RBA) raised rates three times this year.

Money markets trimmed the odds of an RBA rate hike in June to 5%, while investors await the release of Gross Domestic Product (GDP) data for the first quarter of 2026, with estimates of 0.5% quarterly economic growth.

AUD/USD Price Forecast: Technical outlook

In the daily chart, AUD/USD trades at 0.7161, holding a constructive bullish bias as it stays above the cluster of rising trend-line supports and the triple simple moving average (SMA) around 0.7110. Price action respects the most recent uptrend lines stemming from 0.6897 and 0.6833, while the Relative Strength Index (14) hovering near 50 hints at a consolidative, rather than overextended, advance within this broader upward structure.

On the downside, initial support emerges at the latest uptrend line near 0.7155, followed by another rising trend support around 0.7142 and the triple SMA zone near 0.7110; a break beneath this band would expose deeper trend backing closer to 0.6451. On the topside, bulls face the next meaningful resistance at the higher uptrend extension projected toward 0.7810, ahead of a more distant structural barrier near 0.8231, where prior trend geometry could start to cap further gains.

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