AUD/USD stayed under pressure in early European trade on Tuesday, near 0.7130-0.7125. It was just above the monthly low reached on Monday.
Geopolitical uncertainty and firmer expectations of a US Federal Reserve rate rise in 2026 supported the US dollar. This followed a pullback from its highest level since 7 April and weighed on AUD/USD.
Rba Minutes And Market Reaction
Minutes from the Reserve Bank of Australia’s May meeting backed market pricing for another rate rise in August. The Australian dollar did not gain support from this.
On charts, AUD/USD kept a bearish bias below the 100-period EMA on the 4-hour chart and below the 23.6% Fibonacci retracement of the March–May rise. The 14-period RSI sat near 32, just above oversold levels, while MACD was slightly negative and flat.
Support levels were noted at the 38.2% Fib near 0.7108, then 0.7056 at the 50.0% retracement, and around 0.7004 at the 61.8% level. Resistance stood at 0.7173, then 0.7187, with 0.7277 as the cycle high area.
Looking back at the analysis from this time in 2025, the bearish sentiment on the AUD/USD around 0.7130 was well-founded. The geopolitical and monetary policy factors identified then have largely played out as expected. We have since seen the pair break below the key 0.7000 psychological level discussed.
Fed Rba Divergence And Market Impact
The US Federal Reserve did indeed move forward with an interest rate hike earlier in 2026, which was just a market bet last year. Recent US inflation data for April 2026 came in at 3.1%, which was higher than anticipated and keeps the pressure on for a firm Fed policy. This continues to provide underlying support for the US dollar.
In contrast, the Reserve Bank of Australia has paused its own tightening cycle after the hike we saw in August 2025. Australia’s Q1 2026 GDP growth was a sluggish 0.2%, and the latest employment report showed a surprising rise in the unemployment rate to 4.3%. This policy divergence between a hawkish Fed and a patient RBA is now the dominant theme weighing on the pair.
The Australian dollar is also feeling the pressure from weakening commodity prices, a factor that has gained importance over the past year. Iron ore prices have recently fallen to around $105 per tonne, a significant drop from the levels seen throughout much of 2025. This directly impacts Australia’s terms of trade and weighs on sentiment for its currency.
For derivative traders, this environment suggests that selling into any strength remains the prudent strategy for the coming weeks. With the spot price currently hovering near 0.6850, options traders might look at buying puts with a strike price around 0.6750. The path of least resistance continues to appear to be to the downside.
Implied volatility for one-month AUD/USD options has ticked up to 9.5%, reflecting the market’s anticipation of further moves. This means that while the trend is bearish, we should be prepared for sharp counter-trend rallies. Using strategies that profit from downside momentum while managing the cost of options will be key.
