AUD/USD rose on Tuesday, trading around 0.7010 and up 0.43%, supported by reports of tentative diplomatic progress between the US and Iran and by softer US Treasury yields. Israel’s Channel 12 News said Washington and Tehran had given preliminary approval to a compromise proposal relayed by Pakistan’s army chief, a development that improved risk appetite for currencies such as the AUD. The USD remained under pressure as the US Dollar Index fell 0.28% to about 101.70, after nearing 103 last week, its highest level since April 2025, with the currency also reacting to a pullback in AI-linked US equities and reduced enthusiasm for the sector.
Lower yields added to the USD headwinds, with the 10-year Treasury yield around 5.08% versus roughly 5.36% earlier this month, although AUD gains were tempered after the PBoC left China’s one-year LPR at 3.00% and the five-year rate at 3.50%. Oil prices introduced a counterweight: WTI approached $100, the highest in more than a month, as attacks and shipping incidents around the Strait of Hormuz raised supply-risk concerns. A Reuters poll showed 94 of 100 economists expect the Fed to hold rates at 3.75%–4.00% on 27–28 October after a 25 bps September rise, while all anticipate another hike in December. On a one-hour chart, AUD/USD was 0.7007, above the 100-period SMA (0.6960) and 200-period SMA (0.6967), with trend-line support near 0.6989 and RSI (14) at 67; support sits at 0.6995 then 0.6989, while resistance is seen at 0.7014 and 0.7040.
Trading Strategy and Immediate Market Outlook
We recommend derivative traders adopt a tactically bullish stance on AUD/USD in the immediate term, targeting resistance around 0.7014 and 0.7040. With the 10-year US Treasury yield pulling back to 5.08% and the US Dollar Index easing to 101.70, temporary Greenback weakness creates a favorable window for upside momentum. However, long positions should be managed with strict risk controls as the Relative Strength Index sits near 67, signaling a potential short-term pullback.
To capitalize on current market conditions, we can look to establish long entries on shallow dips toward the 0.6989 trend-line support or the horizontal floor at 0.6995. Downside protection should be placed just below the 200-period simple moving average at 0.6967 to hedge against a broader reversal. Maintaining tight stop-loss orders is critical given that 94% of surveyed economists expect the Federal Reserve to hold rates at 3.75%-4.00% next week before delivering another rate hike in December.
Risks and Profit-Taking Considerations
We must also monitor energy market developments closely as West Texas Intermediate crude approaches the $100 mark. Historically, oil rallies driven by supply disruptions in the Middle East tend to reignite US inflation expectations, which could quickly re-energize the US Dollar. Therefore, we advise taking partial profits near 0.7040 ahead of the October 27-28 Fed policy meeting to lock in gains before central bank volatility takes over.
