AUD/USD fell for a fourth day on Friday, trading near 0.6866 and hitting fresh two-month lows. The US dollar stayed firm amid geopolitical tensions in the Middle East and higher oil prices. The US Dollar Index (DXY) traded around 100.19 and was set to end the week up by over 0.50%. AUD/USD was heading for a weekly drop of over 2%, its steepest fall since October 2025. AUD/USD turned bearish after breaking below 0.7000, near the 50-day Simple Moving Average (SMA) at 0.7015. It also moved under the support area around 0.6900, which now acts as resistance. The Relative Strength Index (RSI) slipped towards 37, showing weaker momentum but not oversold conditions. The MACD stayed below its signal line and moved further into negative territory, with a slightly larger negative histogram. Support sits near the 100-day SMA around 0.6815. A daily close below 0.6815 could open a move towards 0.6700. A recovery would need a move back above 0.6900. Further strength would require a break above the 100-day SMA near the 0.7000 level. The bearish outlook we noted for the AUD/USD back in late 2025 has intensified, with the pair now trading near 0.6650. The sustained US Dollar strength, which was a key factor then, has been further fueled by recent non-farm payroll data from February 2026 that beat expectations, showing an addition of 215,000 jobs. This trend reinforces the view that downside risks are building. Geopolitical tensions in the Middle East, specifically recent escalations around the Strait of Hormuz, continue to drive safe-haven flows into the US Dollar. At the same time, the Australian dollar is facing its own headwinds from softening domestic data. Australia’s latest inflation print came in at 2.8%, raising expectations that the Reserve Bank of Australia may consider easing policy later this year. This divergence in economic outlook makes bearish derivative strategies attractive in the coming weeks. We are seeing increased demand for put options with strike prices below 0.6600, as the AUD/USD 1-month implied volatility has risen to 11.5%, reflecting growing uncertainty. Traders could consider buying puts to speculate on further declines or selling out-of-the-money call spreads to capitalize on a capped upside. Fundamentally, the picture is further clouded by commodity prices, with iron ore recently dipping below $100 per tonne, placing additional pressure on the Aussie. From a technical standpoint, the support levels mentioned in late 2025 have now become significant resistance. The 0.6815 level, once seen as support, is now a distant ceiling that is unlikely to be tested without a major shift in market sentiment. For now, the path of least resistance appears to be lower. The psychological mark of 0.6700 was broken decisively last month and now acts as immediate resistance for any minor pullback. Any failure to reclaim this level would likely embolden sellers to target the 0.6500 handle in the next several weeks.

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