AUD/USD falls ahead of RBA decision, Middle East noise limits upside

AUD/USD fell near 0.7190 as markets remain cautious ahead of the RBA decision.
RBA expected to hike 25 bps to 4.35%, supporting the Australian Dollar but limiting gains pending forward guidance.
Geopolitical uncertainty rises after alleged Iranian attack on US boats, boosting safe-haven USD demand.

Agustin Wazne FXStreet

The AUD/USD pair is trading with a cautious tone, hovering near the 0.7190 price zone as investors position ahead of the Reserve Bank of Australia (RBA) monetary policy decision due later on Tuesday.

The RBA is widely expected to deliver a 25-basis-point (bps) rate hike, marking the third consecutive increase. If confirmed, the Official Cash Rate (OCR) would rise to 4.35% from 4.10%, reinforcing the central bank’s commitment to tackling persistent inflation pressures.

Expectations of tighter policy are providing some underlying support to the Australian Dollar (AUD), although gains remain limited as traders await officials' comments to see where they are headed.

At the same time, risk appetite remains fragile as headlines suggesting that Iran allegedly attacked United States (US) military boats despite denials from the US. This has contributed to a cautious market mood. The lack of clarity is keeping safe-haven demand alive, offering intermittent support to the US Dollar (USD) and capping upside attempts in risk-sensitive currencies like the Aussie.

Short-term technical analysis:

On the four-hour chart, AUD/USD trades at 0.7175. The pair sits directly on the 20-period Simple Moving Average (SMA) near 0.7175, leaving a neutral near-term bias while it consolidates just above the 100-period SMA at 0.7151. The Relative Strength Index (RSI) around 48 underscores the lack of clear directional momentum, suggesting the market is pausing after recent swings rather than trending decisively.

On the topside, initial resistance is aligned at 0.7195, with a break exposing the next cap at 0.7200. On the downside, immediate support is derived from the 20-period SMA pivot around 0.7175, followed by nearby horizontal support at 0.7174 and 0.7168. A deeper slide would bring the 100-period SMA at 0.7151 into focus as the next key floor.

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

(This story was corrected on May 5 at 03:55 GMT to say that Reserve Bank of Australia (RBA) monetary policy decision due later on Tuesday, not Monday.)

Author

Agustin Wazne

FXStreet

Agustin Wazne joined FXStreet as a Junior News Editor, focusing on Commodities and covering Majors.

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