Australian Dollar declines from two-month highs as Hormuz tensions lift the US Dollar

The Australian Dollar has slipped from two-month highs as tensions surrounding the Strait of Hormuz have bolstered the US Dollar. AUD/USD traded just below 0.7100 on Tuesday, a slight decrease from the two-month peak observed on Monday. Early in the session, the pair opened with increased strength, reaching 0.7119, but the buying pressure subsided throughout the day, and by mid-American trading hours, it settled near its opening level.

This trend is primarily attributed to geopolitical factors rather than Australian economic indicators. The US Dollar (USD) has regained some of its lost ground as tensions around the Hormuz Strait escalate, supporting a safe-haven position for the Greenback and exerting downward pressure on risk-sensitive currencies such as the Australian Dollar.

Iran's chief negotiator and parliament speaker, Mohammad Bagher Qalibaf, asserted that the Strait of Hormuz would remain closed until Washington adheres to the terms of an interim deal signed in June, which includes lifting naval blockades of Iranian ports, eliminating oil sanctions, releasing frozen assets, and ceasing military operations across all fronts.

This memorandum of understanding expired on Monday, and US President Donald Trump indicated he would not request an extension. Meanwhile, a UK Maritime Trade Operations (UKMTO) agency reported on Tuesday that a vessel had been hit by an "unknown projectile" while crossing the Strait, resulting in engine room damage and a crew member injury.

Trump stated there are no ongoing discussions with Iran and that the US naval blockade continues unabated, reportedly telling Fox News he would target Oman if it interferes with his administration's dealings with Tehran. On the 4-hour chart, AUD/USD is currently at 0.7095, exhibiting a slight bullish bias as it remains above both the 20-period Simple Moving Average (SMA) at 0.7092 and the 100-period SMA at 0.7038.

The currency pair is currently consolidating just below a dense upper band, with momentum leaning neutral-to-positive, as the 14-period Relative Strength Index (RSI) hovers around 54, indicating that buyers hold the upper hand but have yet to display a robust upward movement. The immediate resistance level on the 4-hour chart is at 0.7098, followed by 0.7102 and 0.7111, with a further barrier at 0.7120.

Conversely, the primary support on the downside is the short-term 20-period SMA at 0.7092, while a more substantial support level is found at the 100-period SMA around 0.7038. A sustained break below this latter level could weaken the present positive outlook.