AUD/USD Drops On Iran Conflict Rhetoric And Firm U.S. Data

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The Australian Dollar (AUD) registers losses versus the Greenback on Monday following over-the-weekend developments in the Middle East, which triggered a flight to safety, weighing on the AUD/USD pair. At the time of writing, it trades at 0.7083, down 0.37%.

Aussie weakens as Middle East escalation, firm US data fuel haven demand

Sentiment remains negative after the US President Donald Trump threatened that attacks on Iran are going to continue for four or five weeks. He added that the “big wave” in the war with Iran is yet to come.

Last weekend, an attack by US and Israeli forces eliminated Iran’s Ayatollah Ali Khamenei on Saturday. Since then, tensions escalated with Tehran retaliating against US bases within Gulf state countries and launching a missile against a UK airbase in Cyprus.

Aside from this, economic data in the US revealed that manufacturing activity steadied, despite retreating moderately. The ISM Manufacturing Purchasers Manager Index (PMI) in February came at 52.4, down from 52.6 a month ago but within expansion territory for the second consecutive month.

The ISM Prices Paid sub-component rose to its highest level in three and a half years, from 59 in January to 70.5, the highest since October 2022.

Given the backdrop of a resilient US economy and the jump in high Oil prices, money markets priced in a less dovish Federal Reserve throughout the year. Last Friday, money markets priced in 60 basis points of easing. At the time of writing, they expect the Fed to cut 48 basis points.

Consequently, the US Dollar remains bid as depicted by the US Dollar Index (DXY). The DXY, which measures the buck’s performance against a basket of six currencies, gains 0.83% up at 98.45, a tailwind for the AUD/USD pair.

Traders’ eyes on central bankers, Bullock from the RBA and Williams of the Fed

Later, the Reserve Bank of Australia (RBA) Governor Michele Bullock will cross the newswires on Tuesday and is expected to answer questions regarding heightened geopolitical tensions.

In the US, Regional Federal Reserve Presidents John Williams from New York and Jeffrey Schmid from Kansas City will grab the headlines amid the absence of US economic data releases.

AUD/USD Price Forecast: Technical outlook

In the daily chart, AUD/USD trades at 0.7102. The near-term bias is bullish as spot holds comfortably above the rising cluster of simple moving averages, which trail the market in the 0.6800 area and confirm an established uptrend rather than a late breakout. The RSI around 62 keeps momentum on the buyers’ side without showing overbought stress, while price continues to respect the two upward-sloping support trend lines from 0.6673 and 0.6897, reinforcing a pattern of higher lows.

Immediate support aligns with the inner rising trend line near 0.7090, with a break exposing the 0.7050 area and then firmer demand around 0.7000, where prior reaction lows converge. On the upside, initial resistance emerges at last week’s high near 0.7125, followed by the 0.7170 region, which coincides with the projected break level of the broader ascending trend line. A daily close above 0.7170 would open the way toward the 0.7250 zone, while failure to defend 0.7000 would weaken the bullish structure and shift focus back toward the mid-0.69s.