AUD/USD rose to about 0.7150 on Monday after rebounding from an early Asian low of 0.7132. The move came as tensions increased in the Strait of Hormuz between Iran and the US.
The pair stayed below the 0.7200 area seen late last week. The US and Iran exchanged threats ahead of a second round of peace talks that had been scheduled for Tuesday in Pakistan.
Tensions escalated on Sunday after the US military seized an Iranian cargo ship said to have attempted to close the Strait of Hormuz. Iran said it would retaliate and signalled it might not send a delegation to Pakistan, citing US ceasefire violations.
The ceasefire is due to end on Wednesday. The US Dollar recovered some ground against major peers, though gains were limited.
UOB Bank flagged an upward tilt for AUD/USD, with support at 0.7085. It said the pair may still close above 0.7190 if 0.7085 holds.
Monday’s calendar is light, leaving Middle East developments as the main driver. On Tuesday, US Retail Sales and Kevin Warsh’s Senate testimony are due, while Australia’s preliminary April PMI is due early Thursday.
Looking back at this time in 2025, we recall the market’s nervousness around the 0.7150 level for AUD/USD amid the US-Iran friction. The Aussie’s ability to bounce back despite the headlines was a key lesson. This resilience showed that underlying risk appetite can often outweigh short-term geopolitical scares.
We remember that the peace talks in Pakistan ultimately succeeded, leading to a de-escalation by the end of that week in 2025. This triggered a relief rally, reminding us that such tense moments can create buying opportunities in risk-sensitive currencies. The market quickly shifted its focus back to the solid economic data that followed.
Historical data confirms that after dipping, AUD/USD pushed past 0.7200 and continued to climb through May 2025. That move was supported by strong US Retail Sales figures from that period, which showed a 0.9% monthly increase, and a surprise rebound in Australia’s PMI to 50.8, calming fears of a slowdown. The market showed its willingness to look through the political noise.
Today, on April 20, 2026, we see a similar pattern with the Aussie dipping to 0.6550 due to recent trade friction between China and the US. The lesson from 2025 is to assess if the underlying economic picture remains intact. Recent Australian employment data showed an addition of 65,000 jobs, far exceeding forecasts and suggesting the domestic economy is still robust.
Given this, traders should consider strategies that benefit from a potential rebound while managing risk. Buying short-dated AUD/USD call options with a strike price around 0.6600 offers a low-cost way to gain upside exposure if tensions ease as they did in 2025. This approach limits the maximum loss to the premium paid on the option.
We are also watching this week’s preliminary US GDP figures and the Reserve Bank of Australia’s meeting minutes for further direction. If the US economy shows signs of slowing while the RBA remains hawkish, it could provide another tailwind for the Aussie. Selling out-of-the-money put spreads on AUD/USD would be another way to express a cautiously bullish view, capitalizing on market fear.
