The Australian dollar opened the new trading week barely holding above the psychological 0.7000 threshold, trading near its lowest level since August 4 after last week's five-day slide, as traders positioned cautiously ahead of the Reserve Bank of Australia's policy meeting on Monday. The central bank is widely expected to deliver a 25-basis-point rate increase, and the accompanying statement will matter just as much as the decision itself, since investors are hungry for clearer guidance on where policy heads next. Broader forces are working against the Aussie, however. A renewed US-China trade truce has been extended for another two months, which offers some support to China-sensitive currencies, yet that tailwind has been insufficient to lift the Australian dollar meaningfully. Instead, the currency remains anchored by two heavier influences. First, energy-driven inflation combined with persistently elevated US Treasury yields has pushed market bets on another Federal Reserve rate hike in October higher, keeping the greenback firmly bid across forex markets. Second, the absence of any diplomatic progress in the US-Iran standoff has left regional geopolitics unresolved, muting risk appetite and limiting demand for the Aussie. Taken together, these factors explain why AUD/USD is struggling to build any meaningful momentum despite sitting at technically significant levels. The RBA decision is the immediate catalyst, and traders will scrutinise the tone of the statement for clues about whether further tightening is on the table or whether the central bank is preparing to pause. Any hint of a dovish shift could accelerate downside pressure, while a firmly hawkish message might finally give the currency the lift it has been searching for.
AUD/USD is trading near 0.7025, positioned beneath all four key moving averages, a configuration that confirms sellers retain firm control of the near-term trend. On the hourly chart, the 50-period moving average rests at 0.7020 while the 200-period average sits at 0.7085, placing price just 5 pips above the shorter average but roughly 60 pips beneath the longer one. That razor-thin cushion above the hourly 50-period average is doing valuable work right now, and losing it would likely expose the pair to a deeper slide. On the four-hour chart, the 50-period average is positioned at 0.7085 and the 200-period average at 0.7135, leaving price about 60 pips below the shorter average and roughly 110 pips beneath the longer one. The standout technical feature is that the hourly 200-period average and the four-hour 50-period average both sit at 0.7085, merging into a reinforced resistance shelf at that level, the single most important barrier on the chart right now, and the first real test any recovery must pass. The first resistance barrier sits at 0.7050, a level that has capped recent rebounds. Above it, the 0.7085 confluence forms a heavier hurdle, followed by 0.7110 and 0.7135, the latter aligning with the four-hour 200-period average. Further ceilings sit at 0.7160 and 0.7185 if buyers regain sustained momentum. On the downside, initial support rests at 0.7000, the psychologically significant round number that also marks the recent low. A break below would expose 0.6980, then 0.6955, with 0.6930 marking a deeper demand area likely to attract buyers. If AUD/USD holds above 0.7020 and pushes through 0.7050, buyers could target the 0.7085 confluence and potentially 0.7110 beyond it. Should selling pressure intensify and 0.7000 give way, a deeper correction toward 0.6980 and 0.6955 becomes increasingly probable. The broader structure stays bearish while price remains beneath the four-hour averages, but the next move hinges on whether buyers can defend 0.7000 and how markets interpret the RBA's guidance alongside the Fed's tightening path.
