Insights 
VT 
The Australian Dollar gains against the US Dollar on Tuesday, reflecting its second consecutive session of upward movement. This follows a ceasefire announcement between Iran and Israel by US President Trump, who claimed the destruction of Iran’s nuclear facilities and reported missile interceptions.
The Iranian parliament’s decision to close the Strait of Hormuz adds to geopolitical tensions. Meanwhile, Australia’s private sector sees robust growth according to S&P Global PMI data, tempering expectations of a Reserve Bank of Australia rate cut.
Market Focus Shifts
Market focus is on Fed Chair Jerome Powell’s upcoming Congressional testimony, looking for insights on future interest rate paths. The US Dollar Index stands at approximately 98.20, with pressure from Federal Reserve officials’ dovish remarks suggesting nearing rate cuts due to job market risks and inflation trends.
Federal Reserve’s stance remains flexible, with potential easing next month amid global uncertainties. The Fed has maintained a steady interest rate at 4.5%, projecting reductions by the end of 2025. Federal Reserve Governor Waller indicates easing could start soon.
The People’s Bank of China maintains its Loan Prime Rates. The AUD/USD pair trades near 0.6480, testing the nine-day EMA, with a potential target of 0.6552 if surpassed. Initial support is around 0.6440, aligned with the 50-day EMA, as the AUD remains resilient amidst market shifts.
At present, the Australian Dollar (AUD) is showing strength against the Greenback, making this its second straight day of gains. This push appears tied to recent developments in the Middle East and domestic economic conditions, both of which are shaping expectations on interest rate direction. Given that the US President has declared a ceasefire between long-standing adversaries and referenced disabling hostile nuclear infrastructure, traders are responding to a marked, albeit temporary, reduction in perceived risk premiums. The confirmed interception of missiles introduces further perspective on the restraint shown in that region, albeit with lingering potential for sudden developments—especially with the closure of the Strait of Hormuz, which restricts global oil flow and can stoke volatility in commodity-driven currencies.
Locally, Australia’s private sector continues expanding strongly, based on latest S&P Global PMI data. This suggests that the domestic economy isn’t slowing at the pace previously feared. That, in turn, could defer any need for the Reserve Bank to cut rates, even as inflation measurements approach target levels. This feeds directly into forward pricing for monetary policy instruments, and we’re already seeing those recalibrate over the past several sessions.
Upcoming US activity will be particularly instructive. Powell is scheduled to deliver a testimony before Congress, and based on recent remarks from Waller and others, there is a clear tone shift towards accommodation. We’re watching this closely. The US Dollar Index hovering near 98.20 reflects a sensitivity to softer labour data and cooling inflation readings. If expectations for easing amplify after Powell’s comments, flows into US-denominated assets may weaken, opening the door further for AUD gains.
Technical Levels and Market Outlook
Technical levels are lending support to the upside view as well. The AUD/USD pair is cycling near 0.6480 and has tested its nine-day exponential moving average (EMA). If buyers manage to take the pair over that short-term level, the 0.6552 zone becomes the next probable target. That said, the downside is being protected by the 50-day EMA, currently aligned near 0.6440. The price action reflects a market in search of firmer direction but with a clear bias towards supporting AUD strength unless meaningful surprises emerge.
In China, Loan Prime Rates remain unchanged, giving the Australian Dollar added external support due to steadier outlooks for regional trade. This stability in policy from Beijing is an indirect tailwind, helping to reduce expectations of sudden demand drop-offs.
For those dealing in futures and options based on AUD crosses, it would be advisable to consider shorter-dated calls with limited downside exposure. With implied volatility showing signs of compressing but remaining responsive to geopolitical developments, spreads may offer more efficient positioning than outright directional trades for now.
We will continue watching for signals, especially on upcoming US job data and any firm commitments to rate moves. As it stands, reaction in US fixed-income markets suggests traders are beginning to position more confidently around an easing cycle beginning as early as next month. That default stance will shape risk-reward in AUD-linked pairs over the coming weeks.
