The AUD/USD exchange rate exhibited significant volatility on Monday morning as market participants responded to the unfolding events in the Middle East, where tensions between Iran and the US intensified. The pair was observed at 0.7050, reflecting a minor decline from the year-to-date peak of 0.7140. The AUD/USD exchange rate experienced a pullback as market participants responded to escalating geopolitical tensions in the Middle East, following the US and Israel’s attack that resulted in the death of Supreme Leader Ayatollah Ali Khamenei. They also eliminated significant military leaders within the nation. In its response, Iran closed the Strait of Hormuz, leading Lloyds of London insurers to cancel insurance policies for vessels navigating through the Strait. Consequently, crude oil prices experienced a significant increase, despite OPEC+ revealing a rise in supply during its meeting on Sunday.
Brent and West Texas Intermediate increased to over $85 a barrel, a development that is expected to contribute to rising inflation in the United States and other nations. Concerns regarding inflation have persisted over the past few months. A report released on Friday indicated that both the headline and core Producer Price Inflation diverged further from the Federal Reserve’s 2% target in January. In the near term, the primary driver for the AUD/USD pair will be the forthcoming US ISM manufacturing PMI report. Analysts anticipate that the forthcoming data will indicate a slight decline in the PMI, from 52.6 in January to 52.3 in February. The anticipated S&P Global PMI figure is projected to be 52.3. A PMO figure of 50 or higher indicates that a sector has maintained its expansion trajectory.
The AUD/USD pair is expected to respond to an imminent address by Michelle Bullock, the Governor of the Reserve Bank of Australia. She is anticipated to uphold a notably hawkish stance, particularly following the recent robust Australian employment and inflation figures. The latest data indicated that both headline and core inflation experienced an upward trend in January. The daily timeframe chart indicates that the AUD/USD exchange rate experienced a decline on Monday amid heightened volatility in the forex market. The recent retreat occurred as the pair established a double-top pattern at 0.7137, with a neckline positioned at the significant psychological level of 0.700.
The pair continues to trade above the Supertrend indicator. It continues to stay above the 100-day Exponential Moving Average. Additionally, the two lines of the Percentage Price Oscillator have executed a bearish crossover. Consequently, the AUD/USD pair is expected to experience significant volatility in the upcoming days as the situation in the Middle East intensifies. It is essential to monitor the critical support and resistance levels at 0.7000 and 0.7200.