Geopolitics continue to move markets, ever since the beginning of the year, but this time on more hopeful, positive notes. Serious discussions on a deal in Iran are underway, and traders are already pricing in an incoming resolution, with both oil and the dollar falling.
As North American markets pause for Memorial Day, the US dollar is taking a large step back.
This holiday break offers risk-sensitive assets a solid bid, driven by an overarching market theme of hope versus weeks of geopolitical despair.
With gradual, small steps toward a diplomatic solution, immediate military escalation in Iran has been put on pause and is now considered a less probable option1 by Market participants over the past weeks.
President Trump recently emphasised on Truth Social that his administration is in no rush, demanding an uncompromising, all-or-nothing agreement to avoid the mistakes of previous administrations.2
While the president firmly warned that diplomatic failure guarantees a return to a much stronger military conflict, strategic discussions with leaders from Saudi Arabia, the UAE, Egypt, Türkiye, and many others are actively facilitating peace efforts and opening the door for these nations to join the Abraham Accords3 – which would be a breakthrough for a longer-run peace in the Middle East.
This fragile yet optimistic geopolitical backdrop provided fuel for the Australian dollar (especially with tentative reopenings of the Strait of Hormuz4).
As a highly risk-sensitive currency, the Aussie is strongly capitalising on the subsequent drop in crude oil prices and the fading greenback to start the final week of May, along with broadly optimistic other assets.
AUD/USD is surging toward the upper bound of its prolonged triangle consolidation. Having forcefully reclaimed its key moving averages and pushed back above the critical 0.7160 pivot, the antipodean currency may test an upside breakout as the new trading week unfolds, but will need to first break its upside trendline.
AUD/USD 4H chart, May 25, 2026. Source: TradingView. Past performance is not indicative of future results.
Resistance levels
- June 2022 extremes 0.7200 to 0.7230
- 2026 highs 0.7270 to 0.7300
- 0.7278 May highs
Support levels
- 2023 highs from 0.7140 - 0.7160 resistance
- 0.7070 - 0.7100 intraday key support
- 0.7030 - 0.7040 micro support
- 0.6970 - 0.7000 support
This article and its contents are intended for educational purposes only and should not be considered trading advice.
