AUD/USD Steadies Near 0.6950 As Geopolitics Drive USD Demand

The Australian Dollar begins Thursday's session with minuscule gains of 0.04%, after posting losses of 0.68% on Wednesday, courtesy of broad US Dollar strength, despite improved risk appetite. At the time of writing, the AUD/USD trades at 0.6950.

Aussie pares losses after softer Australian inflation, but broad US Dollar strength keeps upside limited

Geopolitics are driving the financial markets' narrative, as each new headline keeps investors uneasy amid information about the US-Iran war, shifting the markets' mood. Growing speculation about the start of US-Iran talks to end the war in the Middle East pushed US equities, the US Dollar and Gold prices higher, while US Treasury bond yields tumbled.

On Wednesday, Australian inflation was mostly unchanged in February, a relief for Aussie households. The Consumer Price Index (CPI) slowed from 3.8% to 3.7% YoY, though it remained above the Reserve Bank of Australia's 3% target.

Trimmed mean CPI was 3.3% YoY, unchanged from January's downward revised reading from 3.4% to 3.3%.

It's worth noting that the data were collected before the Middle East conflict, which has sent global energy prices soaring, heightening worldwide inflationary risks.

Recently, the RBA Assistant Governor Christopher Kent said that the Iran war has tightened financial conditions, adding that the supply shock posed a risk to inflation. He added that "Central banks cannot change that. But they can ensure that the initial rise in prices does not lead to a rise in longer term inflationary expectations and extended inflationary pressures."

Last week, the RBA raised interest rates to 4.1% on a narrow vote split, which, according to RBA's Governor Bullock, was due not to the policy stance but to the timing.

In the US, Fed Governor Stephen Miran remained dovish, saying that the Fed's inflation mandate "has not been so problematic," while adding that the job market has been in an "extended streak of getting weaker." Miran insisted that the Fed should cut towards neutral this year.

AUD/USD Price Forecast: Technical Outlook

In the daily chart, AUD/USD trades at 0.6942. The near-term bias turns mildly bearish after the pair slipped below the cluster of rising closes supported by the latest uptrend line from 0.6897 and retreated from the recent 0.7150 area. Price now trades under that broken support region near 0.7000, with the spot also slipping beneath the rising simple moving averages that had been guiding the advance, indicating fading upside control. The RSI has rolled down toward the low-40s from the 60 area, confirming a loss of bullish momentum and pointing to building downside pressure rather than an immediate oversold condition.

Initial resistance emerges at the former support band around 0.7000, where the broken short-term trend line and nearby moving averages now cap rebounds, followed by the recent swing highs near 0.7080 and then 0.7120. On the downside, immediate support is seen around 0.6900, just above the broader ascending trend structure from 0.6673, with a break exposing the next bearish target near 0.6800. A daily close back above 0.7000 would ease the current downside bias, while failure to reclaim that level keeps focus on lower supports as sellers press the correction.