AUD/USD Price Forecast: Approaches YTD top amid Iran diplomacy hopes, RBA-Fed divergence

The AUD/USD pair attracts buyers for the third straight day – also marking the seventh day of a positive move in the previous eight – and climbs to over a one-month high during the first half of the European session on Wednesday. Hopes for a second round of US-Iran peace talks remain supportive of the upbeat mood across global financial markets. This, along with the Reserve Bank of Australia's (RBA) hawkish outlook, underpins the Australian Dollar (AUD), albeit a modest US Dollar (USD) uptick might cap gains for the currency pair.

US President Donald Trump indicated that stalled negotiations with Iran could resume within days, while United Nations (UN) Secretary-General António Guterres told reporters on Tuesday that the resumption of US-Iran talks is highly probable. Although there is no formal confirmation yet, this fuels hopes for diplomatic efforts to end the conflict. In fact, US Vice President JD Vance again struck a cautiously optimistic tone and indicated that Washington is pursuing a broader grand bargain aimed at reshaping Iran’s economic integration with the world.

The optimism is evident from a generally positive tone around the equity markets and acts as a tailwind for the risk-sensitive Aussie. Meanwhile, RBA Deputy Governor Andrew Hauser warned that elevated inflation and constrained supply capacity raise the risk of a stagflation-style scenario if energy shocks persist. Hauser added that the RBA is focused on preventing any lift in medium-term inflation expectations, reaffirming bets for further policy tightening in 2026. In fact, the current market pricing suggests a 65% chance of a rate hike in May.

This marks a significant divergence in comparison to diminishing odds for a rate hike by the US Federal Reserve (Fed) and backs the case for a further near-term appreciating move for the AUD/USD pair. The softer-than-anticipated US Producer Price Index (PPI) released on Tuesday eased concerns about the inflationary impact of the war-driven surge in energy prices and tempered hawkish Fed expectations. The resultant decline in US Treasury bond yields favors the USD bears and validates the near-term constructive outlook for the currency pair.

Meanwhile, the path to a durable US-Iran agreement remains uncertain due to the instability in the Strait of Hormuz. Iran's ambassador to the UN described the US blockade, which took effect on Monday, as a grave violation of Tehran's sovereignty. Moreover, Iran’s Islamic Revolutionary Guard Corps (IRGC) has vowed to retaliate, keeping geopolitical risks in play. This helps the USD to rebound slightly from its lowest level since early March, touched on Tuesday, and might hold back the AUD/USD bulls from positioning for further appreciation.

AUD/USD daily chart

Technical Analysis:

Against the backdrop of the late March rebound from the vicinity of the 100-day Simple Moving Average (SMA), the overnight breakout through the 0.7100 mark favors the AUD/USD bulls. The positive outlook is reinforced by the fact that the Moving Average Convergence Divergence (MACD) histogram is positive and expanding, with the MACD line above the signal line and the zero mark, suggesting strengthening upside momentum.

Furthermore, the Relative Strength Index (RSI) at 63 leans to the bullish side without yet signaling overbought conditions, hinting that buyers still retain control of the trend. This, in turn, suggests that the AUD/USD pair is poised to probe higher ground as long as it remains comfortably above the 0.6880 support zone and momentum gauges maintain their positive tone. On the downside, the 100-day SMA at 0.6880 offers the key structural support, and a decisive break beneath this moving average would be needed to undermine the current constructive outlook.

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