AUD/USD Falls To Two-Day Low
The Australian dollar lost momentum on Monday, falling 0.30% as risk appetite weakened following renewed geopolitical tensions in the Middle East.
AUD/USD moved toward a two-day low of 0.7134 after Iran halted negotiations with the United States and Israel intensified attacks in Lebanon, pushing investors back toward the U.S. dollar.
Geopolitics Drive Market Sentiment
The latest pressure on the Australian dollar came as geopolitical developments dominated trading.
Israel’s actions in Lebanon stalled U.S.-Iran talks, prompting intervention from President Donald Trump as Washington attempted to ease tensions between the two sides.
Oil Prices Jump On Middle East Risk
Markets responded by driving oil prices sharply higher. West Texas Intermediate crude rose more than 5%, with prices clearing the 92-dollar-per-barrel mark.
Higher oil prices added to inflation concerns, pushed U.S. Treasury prices lower and supported the greenback. The U.S. Dollar Index rose 0.24% to 99.18, creating a headwind for AUD/USD.
U.S. Factory Data Supports The Dollar
Stronger U.S. manufacturing data also weighed on the Australian dollar.
The ISM Manufacturing PMI rose to 54.0 in May from 52.7 in April, beating expectations and showing that factory activity remained resilient despite geopolitical and supply chain pressures.
Input Prices Ease Slightly
The ISM prices paid component eased from 84.6 to 82.1, suggesting that input cost pressure remains elevated but may be cooling slightly.
The combination of stronger activity and still-high prices reinforced market attention on the Federal Reserve’s next steps, especially as inflation risks remain tied to energy markets.
Powell Warns On Fed Credibility
Federal Reserve Governor Jerome Powell said the central bank could lose credibility if President Trump removes officials over differing views on monetary policy.
The comment came as investors continue to assess whether persistent inflation and stronger economic data could push the Fed toward a more hawkish stance.
Key U.S. Data Ahead
Markets will now turn to several important U.S. economic releases later this week.
JOLTS data is due Tuesday, followed by ADP employment and ISM Services on Wednesday. The main event will be Friday’s Nonfarm Payrolls report, which could shape expectations for U.S. interest rates.
Australian Data Weakens RBA Hike Bets
The Australian dollar has retreated from its recent yearly high of 0.7277 after weaker jobs data and a slight easing in inflation.
The Reserve Bank of Australia has raised rates three times this year, but recent data has encouraged traders to reduce expectations of another move. Money markets now price only a 5% chance of an RBA hike in June.
GDP Data Comes Into Focus
Investors are now waiting for Australia’s first-quarter GDP figures.
Economists expect quarterly growth of 0.5%, a result that could help determine whether the RBA remains cautious or keeps the door open to further tightening later in the year.
AUD/USD Technical Picture
From a technical perspective, AUD/USD still holds a constructive bullish bias despite the latest pullback.
The pair is trading around 0.7161 and remains above a cluster of rising trendline supports and the triple simple moving average zone near 0.7110. The Relative Strength Index near 50 suggests consolidation rather than an overextended move.
Support And Resistance Levels
Initial support sits near 0.7155, followed by another rising trend support around 0.7142 and the triple SMA area near 0.7110.
A break below that zone could expose deeper trend support. On the upside, the next major resistance is projected near 0.7810, with a more distant structural barrier around 0.8231.
Outlook Depends On Risk And Rates
For now, AUD/USD remains caught between geopolitical risk, U.S. dollar strength and shifting expectations for the Reserve Bank of Australia.
If oil prices continue rising and U.S. data stays firm, the dollar may remain supported. But if Australian growth data surprises positively and risk sentiment stabilizes, the Australian dollar could find renewed support above key technical levels.
