The Australian Dollar fell 0.36% on Thursday after remarks from US President Donald Trump lifted the US Dollar and pushed AUD/USD to a low of 0.6860, before it steadied near 0.6900. The move came alongside higher US Treasury yields and weaker global equities.
Oil prices rose, with WTI up more than 11% and trading above $111.00 per barrel. Trump said the conflict could last 2 to 3 weeks, said he did not need the Strait of Hormuz, and urged allies to work to reopen it.
Us Data And Dollar Strength
US trade data showed the deficit widened 3.0% to $84.6 billion in February, as imports rose 4.3% to $372.1 billion and exports climbed 4.2% to a record $314.8 billion. Initial jobless claims fell from 215K to 202K for the week ending March 28, below the 212K forecast, while job cuts topped 60K in March.
Atlanta Fed GDPNow cut its Q1 2026 growth estimate to 1.6% from 1.9%. The DXY rose 0.46% to 100.01.
Australia’s February goods trade surplus more than doubled, and swaps priced a 71% chance of an RBA hike on 5 May. AUD/USD was 0.6911, with support at 0.6900–0.6880 and 0.6830, and resistance at 0.7020, 0.7080, and 0.7120–0.7150.
In the coming weeks, we should prepare for heightened volatility driven by the conflict in the Middle East. The US Dollar is acting as a safe haven, and as long as tensions remain high, this trend is likely to continue, pressuring risk-sensitive currencies like the Australian Dollar. We’ve seen the CBOE Volatility Index (VIX), a key measure of market fear, climb over 25 this past week, confirming this anxious sentiment.
The sharp rise in oil prices to over $111 a barrel is the most significant factor, as it fuels global inflation fears. This surge reminds us of the price shocks we saw in early 2022, which complicated central bank policy and ultimately hit consumer spending. For now, high energy costs will likely provide a floor for the US Dollar, as it is the primary currency for oil transactions.
Balancing Geopolitics And Fundamentals
While the Greenback is strong, we must watch for cracks in the US economic data. The recent downward revision of the Atlanta Fed’s GDPNow estimate to 1.6% and a widening trade deficit suggest the underlying economy may be cooling. Should geopolitical tensions ease, the market’s focus could quickly shift back to these fundamentals, potentially causing a sharp reversal in the Dollar.
On the other hand, the Australian Dollar has strong domestic support that could limit its downside. The Reserve Bank of Australia is signaling a clear hawkish stance, with markets now pricing in a near-certainty of rate hikes in both May and June to combat inflation that remains sticky above 4%. This policy divergence with a potentially slowing US economy provides a solid fundamental case for the Aussie.
Given this conflict between geopolitical risk and economic fundamentals, options strategies on the AUD/USD pair are attractive. We are seeing traders buying call options with strike prices above 0.7080, positioning for a rebound if tensions de-escalate and the RBA’s hawkishness prevails. Simultaneously, buying puts below the 0.6880 support level offers a valuable hedge against a further escalation in the conflict.
We also cannot ignore the positive news from China, Australia’s largest trading partner. Recent data showing China’s manufacturing and services sectors are back in expansion is a significant tailwind for the Australian economy. Reports this morning showed Chinese iron ore imports hit a record for the month of March, directly supporting the Australian trade balance and the Aussie dollar.
