AUD/USD turned lower in Asian trade on Thursday, down 0.24% to about 0.7145 after earlier gains. Risk appetite weakened after Iranian attacks on three ships in the Strait of Hormuz, a route linked to almost 20% of global energy supply.
S&P 500 futures fell 0.53% to near 7,100. The US Dollar Index rose 0.1% to around 98.70, its highest in over a week.
The Wall Street Journal reported that Tehran fired on three ships, escorted two into Iranian waters, and is moving those ships to Iran. Even with a US-Iran ceasefire extension, oil-price rises tied to Hormuz disruption have pressured currencies of oil-importing economies.
In Australia, April flash S&P Global PMI data improved from March. The Composite PMI rose to 50.1 from 46.6, moving back above 50.0, as output increased in both manufacturing and services.
Technically, the pair stayed above the 20-period EMA at 0.7086, after recovering from below 0.70. The RSI was near 60, not in overbought territory.
Support is seen at 0.7086, while resistance includes 0.7222 and then 0.7300.
We are looking back at the events of April 2025, where geopolitical fears in the Strait of Hormuz caused a temporary dip in the AUD/USD despite strong local data. The pair was trading around 0.7145 then, but today it sits significantly lower near 0.6550. This contrast highlights a shift from short-term geopolitical shocks to more persistent economic themes.
The risk-off sentiment in 2025 briefly boosted the US Dollar Index to 98.70, but we see a much more sustained strength today, with the DXY holding firm around 105.80. This underlying dollar strength, driven by differing central bank policies, provides a major headwind for the Aussie dollar that wasn’t as dominant last year. For traders, this means that even positive news for the AUD might have a muted effect.
Similar to last year, Australia’s domestic economy is showing signs of resilience, with the latest flash Composite PMI for April 2026 coming in strong at 53.6. This expansionary signal, much like the one we saw in 2025, should provide a floor for the currency. However, this internal strength is fighting against external pressures.
Unlike the temporary oil shock in 2025, a key factor for us now is the price of iron ore, one of Australia’s most important exports. Its price has softened, currently trading around $110 per tonne, which is well off its highs from the last two years. This weighs on the AUD and explains why the strong PMI data is not translating into a significant rally.
Given this conflict between strong local data and a powerful US dollar, traders could consider using options to manage risk and capture potential moves. Buying AUD/USD call options with a strike price around the 0.6650 resistance level could offer a low-cost way to profit from any unexpected Aussie strength. This strategy limits downside risk if the strong USD trend continues to dominate.
For those already holding long positions, hedging against a further downturn is wise. Buying put options with a strike below the key 0.6500 support level could serve as valuable insurance. This would protect portfolios if US economic data continues to outperform, pushing the DXY even higher and the AUD/USD lower.
