AUD/USD Price Forecast: Defends 200-hour EMA/38.2% Fibo. confluence below 0.7000
- AUD/USD shows some resilience below the 0.7000 and rebounds from a confluence support.
- Rising geopolitical tensions continue to underpin the USD and might cap gains for spot prices.
- The mixed technical setup also warrants caution before positioning for further intraday gains.
The AUD/USD pair opens with a bearish gap at the start of a new week, though it lacks follow-through and recovers around 40 pips from the Asian session low levels below the 0.7000 psychological mark. Spot prices currently trade around the 0.7030 area, still down 0.50% for the day, amid a fresh wave of the global risk-aversion trade.
High-level negotiations between the US and Iran ended without a breakthrough, despite nearly 21 hours of intense discussions over the weekend, jeopardizing a fragile two-week ceasefire. Adding to this, US President Donald Trump said that the US Navy would start blockading the Strait of Hormuz, raising the risk of a further escalation of tensions in the Middle East. This, in turn, tempers investors' appetite for riskier assets, which provides a goodish lift to the safe-haven US Dollar (USD) and exerts heavy pressure on the AUD/USD pair.
Furthermore, a sharp intraday rally in Crude Oil prices revives inflationary concerns, reaffirming bets for a more hawkish US Federal Reserve (Fed) and triggering a fresh leg up in US Treasury bond yields. This turns out to be another factor that benefits the buck. That said, reports that regional countries are working to bring the US and Iran back to the negotiating table within days keep the door open for further diplomacy, and cap the USD. This, along with the Reserve Bank of Australia's (RBA) hawkish tilt, lends support to the AUD/USD pair.
From a technical perspective, spot prices rebound from a confluence support, comprising the 200-hour Exponential Moving Average (EMA) and the 38.2% Fibonacci retracement level of the upswing from the late March low. This suggests that buyers are defending the 0.7000 area. Meanwhile, the Relative Strength Index (RSI) has recovered from oversold territory toward the high 30s, while the Moving Average Convergence Divergence (MACD) holds in negative territory with a flat profile. This suggests that bearish momentum is fading but not yet reversed.
Meanwhile, a sustained strength above the 23.6% Fibo. retracement at 0.7032 would expose the Fibonacci anchor near 0.7093. On the downside, initial support is aligned around the 200-period EMA at 0.6996 and the clustered 38.2% Fibo. retracement at 0.6995. A decisive break below this zone would open the way toward deeper Fibonacci supports at 0.6964 and 0.6934, with 0.6891 and 0.6835 following as lower structural floors if selling pressure resumes.
(The technical analysis of this story was written with the help of an AI tool.)
AUD/USD 1-hour chart
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
