AUD/USD pushes higher on Thursday, marking a fourth straight day of gains and trading near 0.7087, close to three-week highs. The pair continues to benefit from sustained weakness in the US Dollar, driven by shifting geopolitical sentiment and evolving expectations around US monetary policy.
The Greenback came under strong selling pressure after Donald Trump confirmed a temporary ceasefire agreement with Iran. While the initial announcement lifted market confidence, optimism faded slightly after Tehran claimed that parts of the agreement had already been breached following Israeli strikes on Lebanon. This has kept overall sentiment cautious rather than fully risk-on.
Even so, the reduced immediate threat of escalation has limited demand for safe-haven assets, allowing risk-sensitive currencies like the Australian Dollar to hold firm. The Aussie is also supported by a relatively hawkish outlook from the Reserve Bank of Australia, which continues to signal concern over persistent inflation pressures.
Markets are now closely watching upcoming US-Iran discussions scheduled to take place in Pakistan. Reports suggest that Washington is pushing for reduced military activity in the region to support diplomatic progress, while Israel is preparing for direct talks with Lebanon aimed at easing tensions and addressing security concerns.
On the macro front, recent US data delivered mixed signals. Inflation, as measured by the Core Personal Consumption Expenditures index, rose in line with expectations on a monthly basis, while the annual rate eased slightly. Meanwhile, economic growth figures were revised lower, pointing to softer momentum in the US economy.
Insights from the Federal Open Market Committee minutes revealed a divided outlook among policymakers. Some members see prolonged geopolitical tensions as a risk to employment, potentially justifying rate cuts, while others warned that persistent inflation—especially if driven by higher oil prices—could require tighter policy.
Looking ahead, traders are focused on the upcoming US Consumer Price Index release, which could play a key role in shaping expectations for the Federal Reserve’s next moves.
In the near term, AUD/USD remains supported by a softer US Dollar and stable risk sentiment, though geopolitical uncertainty may limit aggressive upside.
Trade Idea:
Buy AUD/USD on dips near 0.7040, targeting 0.7150, with a stop below 0.6990, as USD weakness and RBA support continue to favor upside momentum.