• The AUD/USD forecast remains subdued amid Middle East chaos. 
• US attacks on Iran provoked Iran to choke Hormuz Strait, deteriorating the risk sentiment. 
• Mixed Aussie data may not prevent RBA to cut further. 

The AUD/USD forecast slipped as the pair started the week under pressure, posting fresh five-week lows near 0.6400 as geopolitical tensions weighed heavily on the currency. The pair reversed from six month highs near 0.6551, posting three consecutive daily declines.

The surging oil prices amid rising global uncertainty following the US military airstrikes on Iran’s three nuclear facilities over the weekend, triggered weakness in the Australian dollar. President Trump confirmed that American B-2 bombers targeted Fordow, Isfahan, and Natanz, in coordination with Israeli forces. Iran responded with a pledge of “everlasting consequence” and approved a measure to choke the Hormuz Strait. This action could disrupt the oil supply and escalate the conflict further.

The US dollar benefited from the safe-haven flows while the Aussie was hit hard as a risk barometer currency. Although the Dollar Index (DXY) pared gains and traded near mid-99.00, investors stay cautious due to evolving geopolitical backdrop.

On the data front, the Australian economy showed mixed signals. Employment change revealed a loss of 2,500 jobs in May while unemployment figures were steady at 4.1%. The PMI data was positive as composite reading for June ticked to 51.2, suggesting marginal expansion. However, these indicators are not enough to keep Reserve Bank of Australia from cutting rates.

The markets have now turned their attention to Australia’s monthly CPI data due Wednesday. This will be the final inflation figure before RBA’s policy meeting in July 8. The headline inflation is expected to tick down to 2.3% y/y from 2.4%. The trimmed mean is anticipated to drop to 2.5%. The markets are now expecting a 25 bps cut in July with 80% probability and more easing is likely to occur later this year if employment and growth data do not show a recovery.

Market participants are now eyeing Fed Chair Powell’s 2-day testimony. As Fed held rates steady, it is important to find clues whether the central bank would cut rates in September. Moreover, US PMI data is also important to watch.
 

AUD/USD Technical Forecast: Oversold Aussie Attempting Recovery

(Click on image to enlarge)

AUD/USD 4-hour chart

The AUD/USD 4-hour chart shows a comeback effort after the price tested a support zone near 0.6400. The price broke the trendline support previously, showing a solid bearish trend. Now the broken level at 0.6450 acts as a resistance. Although the price is well below the 20-period SMA, the RSI hit the oversold area and started rising. It means the pair has a potential to recover further.

Alternatively, the price could pierce the 0.6400 support. In that case, the Aussie may drift lower towards the next support at 0.6360 ahead of 0.6300.

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