Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.7185.
- Add a stop-loss at 0.6950.
- Timeline: 1-2 days.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6950.
- Add a stop-loss at 0.7185.
The Australian dollar surged to its highest point since March 20th as the geopolitical tensions faded and crude oil prices plunged by double digits. The AUD/USD pair soared to a high of 0.7058, up by over 3.4% from its lowest level in March this year.
Australian Dollar Jumps as Risks Ease
The AUD/USD exchange rate soared sharply as investors embraced a risk-on sentiment in the market. In a statement on Tuesday, President Donald Trump said that he had agreed to a two-week ceasefire with Iran, which will remain as long as the latter agrees to open the Strait of Hormuz.
Most importantly, he said that Iran’s list of ten demands were a good basis for negotiations.
Iran has asked for an immediate end to the war, an end to Israeli attacks against Hezbollah, compensation, a transit fee for commercial ships going through the Strait of Hormuz, and lifting all sanctions. It is unclear whether the US will agree to these conditions.
A sustained deal will lead to a sharp decline in crude oil prices as ships stranded at sea restart their movements. Such a move will be bullish for Australia, a country that depends mostly on oil imports. Brent and the West Texas Intermediate were trading at $93 and $95, respectively, down sharply from this week's high of over $110.
The AUD/USD pair will react to American macro data as there will be no numbers from Australia. The first key macro event will be the upcoming Federal Reserve minutes, which will come out later today.
After that, the US will release the latest GDP and PCE Inflation reports on Thursday followed by the official CPI report on Friday.
AUD/USD Technical Analysis
The AUD/USD exchange rate rebounded to 0.7083, its highest point since March 20th this year. This rebound has pushed it above the 50-day Exponential Moving Average (EMA). Similarly, the Relative Strength Index has turned around and moved above the middle line of 50.
The two lines of the Stochastic Oscillator have also jumped recently. Therefore, the most likely AUD/USD forecast is bullish, with the next key target being at 0.7185, its highest point this year. A move above that price will point to more gains, potentially to the psychological level at 0.7200.