Aussie climbs for a third week running as Middle East tensions return to the fore

Risk sentiment lifts the Aussie despite domestic headwinds

AUD/USD finished higher last week at 0.7167 (+1.47%), locking in a third straight week of gains. While this is noteworthy, the real highlight was seeing the Aussie trade above the 0.7200 handle for the first time in almost four years.

This advance was heavily supported by a broader improvement in risk sentiment, fuelled by hopes of a permanent Middle East ceasefire that ultimately weighed on the safe‑haven United States (US) dollar. Domestically, Australia’s resilient March labour force report added further tailwinds, with employment rising by 17,900 and the unemployment rate holding steady at 4.3%. The solid jobs print reinforced market expectations for another Reserve Bank of Australia (RBA) rate hike when the board meets in just over two weeks’ time.

Those positive drivers helped the pair brush aside the emergence of some notable headwinds, including weak Australian business and consumer confidence data, as well as a fire at one of Australia’s last two refineries that amplified domestic fuel security fears. On top of this, China’s 33rd consecutive month of falling home prices is a worrying sign for Australia’s iron ore export outlook, given China’s dominant role as the buyer of Australian iron ore for its steel industry.

Nonetheless, the combination of recovering global risk appetite, a sharply weaker US dollar and hawkish RBA expectations ultimately proved to be the stronger force.

Geopolitical risks resurface but markets look through the noise

Over the weekend, however, fresh developments in the Middle East introduced a heavy dose of caution. Just after Iran’s foreign minister declared the Strait of Hormuz open to commercial vessels, the Islamic Revolutionary Guard Corps (IRGC) quickly announced it was re‑closing the vital waterway for as long as the US naval blockade remains in place, reportedly firing on at least two tankers. Adding fuel to the fire, reports emerged that the US had seized an Iranian cargo ship attempting to run the blockade, prompting Tehran to vow immediate retaliation.

This fresh injection of uncertainty initially saw AUD/USD fall 54 pips (-0.75%) to a low of 0.7113, before it managed to pare most of those losses to trade around 0.7155 (-0.18%) at the time of writing. The catalyst behind this resilient rebound in the Aussie and other risk assets is that markets remain inherently forward‑looking. Traders appear convinced that the looming 22 April ceasefire deadline will simply be extended, allowing peace talks and diplomatic pressure to continue behind the scenes to break the current stalemate.

Looking ahead, with no major domestic data on the docket this week, AUD/USD will be driven primarily by broader risk sentiment and ever‑evolving Middle East headlines. Traders will also be keeping a close eye on the ongoing US corporate earnings season and key economic releases, namely US retail sales for March and the April flash purchasing managers’ indices (PMI). These will provide additional clues on the health of the US economy and the prospects of a Federal Reserve (Fed) rate cut before year end, with the interest rate market pricing in a 64% chance of a 25 basis point (bp) rate cut before year end.

AUD/USD technical analysis

In mid‑March, we highlighted the possibility that the 0.7189 high from 11 March was a potential Wave V (Elliott Wave) advance off the November 2025 low of 0.6419. This effectively set the stage for a much‑needed corrective pullback.

That correction ultimately took AUD/USD down to a low of 0.6831 in late March, falling just short of our 0.6800 - 0.6760 support zone. This area of support housed both the 50% Fibonacci retracement of the broader rally from 0.6419 to 0.7189, located at 0.6804, alongside the previous swing high of 0.6766 from 6 January. Since finding its footing there, we have witnessed an impressive 5.7% rally from the 0.6831 low through to Friday night’s 0.7221 high.

The subsequent retreat from the 0.7221 high suggests AUD/USD has commenced another period of consolidation, which could see the pair pull back towards support around the 0.7050 level. Once this breather is complete, the technical set‑up suggests AUD/USD is well positioned to resume its broader rally, with the next major upside target sitting at 0.7400.

AUD/USD daily candlestick chart

• _{Source: TradingView. The figures stated are as of 20 April 2026 Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}