Australian Dollar reverses as Iran risks lift USD ahead of Fed minutes
- AUD/USD reverses from 0.7119 as Middle East uncertainty weighs.
- Weak US housing data fails to sustain Aussie gains.
- Australia wage data and Fed minutes drive next move.
The Aussie Dollar reversed its course against the Greenback on Tuesday as investors remain uncertain of the outcome of the Middle East conflict, which tends to push energy prices higher, increasing the likelihood that major central banks would need to tighten monetary policy. The AUD/USD trades at 0.7080 after reaching a high of 0.7119.
AUD/USD Reverses as Iran Risks Lift Dollar Before Fed Minutes
The US-Iran conflict is making headlines. Recently, CNN, citing a US official, reported that Trump instructed senior officials to stop talks with Iran. Trump also confirmed that the US Navy blockade is still active, while US data was mixed, with Housing Starts falling short of expectations due to higher mortgage rates and elevated prices.
US housing and industrial production data disappointed traders. Housing Starts fell 12.4% MoM from 1.415 million in June to 1.239 million in July, due to high prices and elevated mortgage rates. At the same time, the Fed revealed that Industrial Production slowed from the expected 0.3% to 0.2% MoM.
In Australia, traders would eye the release of the Wage Price Index for the second quarter, with figures forecast at 0.8%, unchanged from the previous print. Annually, the index is projected to ease from 3.3% to 3.2%.
Meanwhile, Moody’s rating agency affirmed Australia’s creditworthiness at Aaa, maintaining a stable outlook. The agency expects real GDP growth of 1.9% this year and 1.6% in 2027, and added that weak productivity, housing affordability, higher debt and exposure to external shocks are key challenges.
In the US, the economic docket will feature the release of the Federal Reserve’s last meeting minutes.
AUD/USD Price Forecast: Technical Outlook
In the daily chart, AUD/USD trades at 0.7081, maintaining a mildly bullish near-term bias as spot holds above the 50-day simple moving average (SMA) at 0.6993 and the more recent uptrend support around 0.7058. Price is currently testing a broader ascending trend line derived from the 0.6833 base, reinforcing the 0.7080 area as an immediate pivot, while a firming Relative Strength Index (14) near 59 suggests constructive momentum without yet reaching overbought territory.
On the downside, initial support is eyed at the 0.7081 pivot before 0.7058 and the 50-day SMA at 0.6993, with deeper backing coming from the former downward trend-line break level near 0.6399. On the topside, a sustained move higher would first target the ascending trend-line break zone around 0.7307, ahead of secondary resistance levels at 0.8425 and 0.9139, where prior structural barriers could slow further gains.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
Author
Christian Borjon Valencia
FXStreet
Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.
