Australian Dollar holds near June highs, above 0.7150 ahead of expected Iran sanctions

• AUD/USD enters a bullish consolidation phase as traders await further geopolitical developments.
• Rising US-Iran tensions keep geopolitical risk premium in play, underpinning the safe-haven USD.
• Receding Fed hike bets cap the USD and support the pair ahead of key inflation reports this week.

The AUD/USD pair extends the sideways consolidative price move near its highest level since early June, touched on Friday, and holds steady above mid-0.7100s through the early European session. Bulls now seem hesitant and opt to wait for further developments surrounding the Middle East crisis amid escalating US-Iran tensions.

US Treasury Secretary Scott Bessent is due to announce what he has called the toughest sanctions in history on Iran at a press conference later this Monday. Iran's Supreme National Security Council secretary, Mohsen Rezaei, responded by warning that the Islamic Republic would halt all oil exports through the Strait of Hormuz and anywhere else in the Persian Gulf if economic war continues. Rezaei added that any country participating in the US sanctions would be treated as an act of war against Iran. This keeps geopolitical risk premium in play, offering some support to the safe-haven US Dollar (USD) and acting as a headwind for the AUD/USD pair.

Any meaningful USD upside, however, seems elusive as tamer July US inflation data cooled expectations for near-term policy tightening by the US Federal Reserve (Fed). Moreover, the US Treasury's buyback support plan drags US bond yields lower, which contributes to capping the Greenback. Traders, however, are pricing in over a 70% chance of at least one Fed rate hike by the year-end amid inflation risks stemming from volatile oil prices. Hence, the focus will be on the release of the US Personal Consumption Expenditures (PCE) Price Index (PCE) on Wednesday and Fed Chair Kevin Warsh's speech at the Jackson Hole Symposium.

Investors will look for more cues about the future policy path, which will play a key role in influencing the near-term USD price dynamics. Apart from this, the Australian consumer inflation figures, also due on Wednesday, should provide some meaningful impetus to the AUD/USD pair. Nevertheless, the aforementioned fundamental backdrop seems tilted in favor of bullish traders, suggesting that any corrective pullback is more likely to be bought into and remain limited.

AUD/USD daily chart

Technical Analysis

The AUD/USD pair sustains a bullish near-term bias above the 100-day Simple Moving Average (SMA) at 0.7072 and the 61.8% Fibonacci retracement of the May-June decline, at 0.7113. Any further move up could face immediate resistance at the 78.6% Fibo. retracement at 0.7183, ahead of the cycle high at 0.7272. On the downside, initial support is seen at the 61.8% retracement at 0.7113, followed by the 100-day SMA at 0.7072 and the 50% retracement at 0.7064, with deeper cushions emerging at 0.7015 and 0.6955, before the structural floor near 0.6857.

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