Navigating the Australian dollar's transition from a commodity-driven currency to a global risk barometer amid intensifying Middle East tensions.
Chart of The Week - AUD/USD under downside pressure as stagflation fears rise
Key takeaways
- Stagflation driving AUD/USD behaviour: Rising oil prices and persistent US–Iran tensions have amplified stagflation risks, shifting AUD/USD from a commodity-driven currency to a risk-sensitive asset closely tied to global sentiment.
- Stronger equity correlation: AUD/USD’s correlation with global equities (ACWI) has surged significantly, highlighting its increasing dependence on broader risk appetite rather than domestic or commodity fundamentals.
- Bearish technical structure intact: The pair remains below key moving averages within a descending channel; below 0.6833 opens downside toward 0.6760–0.6650, while only a break above 0.6980 would invalidate the bearish outlook.
Over the past two weeks, concerns about stagflation have intensified, driven by surging oil prices amid ongoing disruptions to global energy flows caused by the US–Iran conflict, which shows no clear signs of de-escalation and continues to impact key Gulf oil production and refining assets.
AUD/USD is now behaving like a risk asset
Fig. 1: Movement of iShares MSCI All Country World Index ETF with AUD/USD as of 2 Apr 2026 (Source: TradingView).
As a result, the Australian dollar has become increasingly sensitive to shifts in risk sentiment, with stagflation fears overshadowing its traditional characteristics as a “commodity currency” and hawkish guidance from the Australian central bank, RBA.
Since mid-March 2026, AUD/USD has exhibited a much closer alignment with global equities. The 20-day rolling correlation with the iShares MSCI All Country World Index (ACWI) ETF has surged to 0.56, up sharply from 0.12 on 16 March 2026 (see Fig. 1).
Below the 20-day and 50-day moving averages
Fig. 2: AUD/USD medium-term trend as of 6 Apr 2026 (Source: TradingView).
The recent rebound of 1.9% seen in the AUD/USD from the 30 March 2026 low of 0.6833 has remained below its 20-day and 50-day moving averages.
In addition, the price actions of the AUD/USD have continued to oscillate within a descending channel from its current 52-week high of 0.7188, printed on 11 March 2026.
Watch the 0.6980 key medium-term pivotal resistance on the AUD/USD to maintain its potential medium-term bearish trend.
A break below 0.6833 may expose the next medium-term support at 0.6760 and even the possibility of testing the long-term pivotal support at 0.6675/0.6650 (also the key 200-day moving average).
On the other hand, clearance and a daily close above 0.6980 invalidates the bearish scenario for the next medium-term resistances to come in at 0.7030 (also the 50-day moving average) and 0.7118.
The information presented is historical information, and past performance is not indicative of future performance.
