AUD/USD traded near 0.7150 in the European session on Monday, after recovering earlier losses. The move came as the US Dollar weakened on expectations of a faster US-Iran deal.
The US Dollar Index (DXY) was near 99.20, after falling to 99.15 from an intraday high of 99.40. An Iranian foreign ministry spokesperson said Iran is focused on ending the war, and confirmed talks via Pakistan are continuing.
Central Bank Focus
Market attention turns to the Reserve Bank of Australia (RBA) minutes on Tuesday and the Federal Open Market Committee (FOMC) minutes on Wednesday. These releases may affect expectations for interest rates.
Technically, AUD/USD held below the 20-day EMA at 0.7180, which acted as resistance. The pair stayed above the prior uptrend support break near 0.6992, while the RSI was 48.
Resistance remained at 0.7180, with a close above it pointing back towards recent highs. If the pair fails to hold 0.7118, it could fall towards 0.7100, and a break below 0.7118 could open a move towards the trendline near 0.7000.
RBA minutes are published two weeks after the rate decision and include discussion details and individual votes. They also cover economic conditions, inflation views, international developments, and exchange rate considerations.
Updated Market Backdrop
We are looking at a very different picture today, May 18, 2026, compared to the past environment where AUD/USD was at 0.7150. The pair is now struggling to hold the 0.6650 level as the US Dollar Index remains strong near 104.50. This reflects a major shift in market dynamics, driven less by speculative geopolitical deals and more by fundamental economic data.
The main driver for us now is the clear policy difference between the Reserve Bank of Australia and the Federal Reserve. We saw the RBA hold its cash rate steady at 4.10% earlier this month, citing concerns over persistently weak consumer spending. This contrasts sharply with the Fed, where April’s data showed US core inflation remains sticky at 3.1%, keeping the door open for further tightening.
Looking back at that period from the perspective of 2025, we recall the focus was on pandemic recovery and shifting global alliances. For us derivative traders today, this means strategies should account for sustained US dollar strength against the Aussie. Buying puts on AUD/USD or setting up bear put spreads could protect against further downside driven by this central bank divergence.
Just as traders in the past awaited the RBA and FOMC minutes, our attention in the coming weeks remains fixed on these releases for any change in tone. We are now watching the 0.6600 level as a key psychological support for the Aussie, a level unseen since late 2024. Any unexpectedly hawkish surprise from the RBA could cause a short-term squeeze, making short-dated call options a potential hedge against a sudden rally.
