Aussie Dollar struggles at 0.70, retreats as Oil shock boosts the USD

The Australian Dollar struggled to maintain its value, slipping nearly 0.40% on Monday due to a lack of liquidity from the Columbus Day holiday. Most US cash markets were closed as market participants focused on recent geopolitical developments. The AUD/USD currency pair traded near 0.6950, after briefly dipping below 0.7000. In response to geopolitical tensions, including the Russia-Ukraine conflict and President Trump's announcement of lifting sanctions on Russian diesel exports, investors were initially optimistic.

However, this optimism was short-lived when Russia attacked a power plant, prompting Ukraine's President Zelenskyy to warn of potential retaliation. Simultaneously, the ongoing conflict between Houthis and Saudi Arabia, along with Tehran's strikes on vessels in the Strait of Hormuz, further bolstered the US Dollar. The US Dollar Index (DXY), which measures the dollar's performance against six peers, rose by 0.33% to 102.56.

Meanwhile, energy prices showed an upward trend, with West Texas Intermediate (WTI) increasing by over 1.60% to $93.17. In the US, the economic calendar was relatively light, with Cleveland Fed President Beth Hammack reiterating the need for further rate hikes, suggesting that the neutral rate of monetary policy is close to the upper limit set by the Federal Open Market Committee (FOMC).

The week ahead will see additional Fed speakers and the release of US inflation data, which are expected to influence market participants before the FOMC policymakers take a break. In Australia, traders are eagerly awaiting the release of the National Australia Bank (NAB) Business Survey and the Reserve Bank of Australia (RBA) meeting minutes.

The RBA's Governor Bullock recently took a more neutral stance, suggesting that three rate hikes may be sufficient to curb high inflation. On the daily chart, AUD/USD currently trades at 0.6957, maintaining a bearish short-term outlook as the price remains below the latest triple simple moving average cluster near 0.7088. The currency pair is also capped by the broader downtrend resistance line originating from 0.8015.

The Relative Strength Index (14), at 36.7, indicates lingering downside pressure but is not yet strong enough to warrant a significant upward correction. The upper resistance level lies at the grouped simple moving averages around 0.7088, with additional resistance overhead and a horizontal barrier at 0.7198 suggesting limited upside potential.

Conversely, the downside is supported by rising trend lines from 0.6897 and 0.6865, along with longer-term support from 0.6833 and 0.6673. A decisive break below these rising support levels could further strengthen the bearish trend.