Why is the Australian Dollar shrugging off Iran war jitters as RBA hike bets double?

• Gains in AUD/USD continue, with the pair advancing 0.44% to 0.7027.
• Restrictive policy has not prevented a worsening inflation outlook, RBA's Hauser cautions.
• Ahead of Flash PMIs, the probability of an RBA rate hike almost doubles to 60%.

Positive market sentiment is supporting a fourth consecutive day of gains for the Australian Dollar against the US Dollar, despite elevated Middle East tensions and recent reports pointing to renewed hostilities. Against this backdrop, AUD/USD is trading at 0.7027, a gain of 0.44%.

Can hawkish RBA expectations sustain AUD/USD's four-day advance despite geopolitical uncertainty?

An after-hours boost from AI-related trading followed a largely flat close for US equities, as Meta and Tesla reported earnings. Currency markets, however, saw the Greenback regain some ground after reports that the US State Department was preparing an order for some staff and family members at the US embassy in Saudi Arabia to leave.

While signalling readiness to give diplomacy another opportunity, Iran’s foreign minister warned that choosing war would bring an even greater strategic failure for the US. Separately, Fars reported that multiple explosions had been heard in Sirik; their source and nature are still unknown.

With no US economic releases on the calendar, traders were looking ahead to Thursday’s Initial Jobless Claims and the subsequent University of Michigan Consumer Sentiment release. The principal focus, however, remains next week’s Federal Reserve monetary policy decision, alongside the release of its preferred inflation measure, the Core Personal Consumption Expenditures (PCE) Price Index.

Australia’s otherwise empty calendar was punctuated by hawkish remarks from Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser. He said that “inflation outlook appears worse than forecast, slightly above expectations,” adding that signs of deterioration in the inflation outlook persist even though monetary policy is working.

According to Prime Terminal data, money markets put the likelihood of a 25 basis points RBA rate increase to 4.85% at nearly 60% after Hauser’s comments. That compares with a 30% probability a day earlier.

Next on Australia’s economic calendar is the October 22 release of S&P Global Flash PMIs.

AUD/USD Price Forecast: Can the pair overcome technical resistance?

A bearish short-term bias persists on the daily AUD/USD chart, where the pair trades near 0.7024. Spot remains below the cluster of three simple moving averages (SMAs) around 0.7077, as well as rising trend lines that now act as overhead resistance at 0.7086–0.7087 and 0.7111–0.7118. At 52.5, the Relative Strength Index (RSI) is slightly positive but remains near neutral. This points to limited recovery momentum, which has yet to overcome the pressure from those resistance levels.

Whether the pair can retain the current pivot zone near 0.7024 is the immediate downside consideration. Below it, the next significant structural support lies at a rising trend line around 0.6946, followed much further down by the longer-term falling trend-line anchor near 0.6246. Any advance would first encounter the three-SMA cluster around 0.7077, ahead of closely grouped former support trend lines at 0.7086–0.7087 and 0.7111–0.7118. A further horizontal resistance level stands at 0.7198.

(The technical analysis of this story was written with the help of an AI tool. Know more.)