Geopolitical Risks and Jobs Data Shape Australian Dollar Trend
The Australian Dollar (AUD) corrected on Tuesday as geopolitical tensions between Israel and Iran weighed on market sentiment. Traders moved to safe-haven assets, putting pressure on AUD/USD. The pair gave back gains from the previous session and hovered near short-term support levels.
Despite the pullback, AUD/USD remains within a positive trend. Iran reportedly called for an immediate ceasefire and asked regional countries to pressure the US for de-escalation. This gesture improved sentiment and helped stabilise the AUD/USD. However, continued missile attacks between the two countries are intensifying the conflict and increasing market risks.
The market now awaits Australia’s Employment Change and Unemployment Rate data, which could provide fresh direction. Strong figures may raise expectations for a hawkish Reserve Bank of Australia (RBA), which could support the Australian dollar (AUD). However, geopolitical headlines and US data are likely to dominate price action in the short term.
Safe-Haven Flows and Fed Rate Outlook Support US Dollar
Meanwhile, the US Dollar edged higher on Tuesday as investors sought safety. The US Dollar Index (DXY) traded around 98.20 during the session. A recent rise in consumer sentiment, combined with steady PPI figures, suggests underlying resilience in the US economy. The chart below shows that the US producer prices increased 0.1% in May 2025, following an upwardly revised 0.2% fall in April. The market waits for US Retail Sales data due on Tuesday, which could further influence the Greenback.
On the other hand, President Trump’s sharp rhetoric on Iran also contributed to risk aversion. His call to evacuate Tehran and demands to curb Iran’s nuclear program underscored the potential for escalating conflict. These developments reinforced support for the USD and increased volatility in risk-based currency pairs.
The USD/JPY pair exhibited mixed signals as it continued to remain under pressure within a descending broadening wedge. As long as the pair stays below 148.30, bearish momentum may continue, especially with a weak US outlook on rate cuts.
Expectations for the Fed to hold rates steady this week have kept traders on edge. Markets now price in a 25-basis-point rate cut by September. If Tuesday’s Retail Sales data beats expectations, it could delay rate-cut hopes and support USD/JPY. However, rising global tensions may continue to drive flows into the Japanese Yen as a safe-haven asset.
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