The Australian dollar initially weakened against the US dollar in early Asian trading on Monday, touching around 0.7023, before staging a recovery. The currency pair is currently trading slightly higher, up approximately 0.2% near the 0.7050 level.

Over the weekend, Iran launched multiple rounds of missiles towards northern Israel, sparking market concerns about a prolonged conflict in the Middle East. Iranian officials warned that any Israeli attack on Lebanon or Iran would be met with a "devastating and comprehensive response."

Concurrently, the US President indicated he would contact the Israeli Prime Minister to urge against retaliatory actions, aiming to prevent the breakdown of a tripartite ceasefire agreement.

As markets gradually digested the geopolitical risks and with diplomatic channels between the US and Iran not entirely closed, safe-haven demand retreated during the session, limiting further upside for the US dollar.

US Jobs Data Offers Dollar Support, but Partially Priced In

Data released by the US Bureau of Labor Statistics on Friday showed the US economy added 172,000 jobs in May, with the previous month's figure revised up to 179,000, marking a third consecutive month of robust growth. The unemployment rate held steady at 4.3%. This optimistic report provided fundamental support for the US dollar, but the currency failed to extend its gains into the Asian trading session on Monday.

Analysis suggests key reasons include: the market had already partially priced in the positive data; and there remains divergence in the Federal Reserve's policy outlook, with employment and inflation signals not yet forming a consistent expectation.

Meanwhile, following the weekend missile attacks, neither the US nor Iran took further escalatory actions, leading to a marginal easing of market risk aversion and weakening safe-haven buying of the US dollar. Against this backdrop, the US dollar softened in Asian trading, creating a window for a rebound in non-US currencies like the Australian dollar. Market focus is now shifting to this week's Federal Reserve interest rate decision and US CPI data.

RBA Hawkish Stance Provides Crucial Support for the Aussie

The hawkish tone from the Reserve Bank of Australia (RBA) is a core factor enabling the Australian dollar's recovery from its lower opening.

RBA Governor Michele Bullock previously emphasized that, following three interest rate hikes earlier this year which pushed the cash rate to 4.35%, the central bank remains strictly focused on containing inflation.

Bullock added that current inflation levels remain too high, and the Board will take all necessary actions to fulfill its mandate of price stability and full employment. This firm stance contrasts sharply with recent market expectations for a Federal Reserve policy pivot, providing a unique supportive logic for the Australian dollar.

Notably, market expectations for a policy divergence between the RBA and the Federal Reserve are continuing to strengthen, becoming a key variable for the Australian dollar's medium-term trajectory.

Strategists at TD Securities pointed out that Australia is entering a rare phase of "unilateral RBA tightening"—expecting the RBA to continue raising rates while the Federal Reserve is anticipated to begin an easing cycle against a backdrop of receding inflation.

The firm's analysis suggests the divergence in the two central banks' policy paths is widening, a situation almost unique among G10 currencies. Historical experience indicates such policy divergence provides structural support for the Australian dollar, with its appreciation often exceeding predictions from traditional interest rate differential models. Looking back at a similar monetary policy divergence cycle in 2018-2019, the Australian dollar appreciated by over 8% against the US dollar within six months.

Furthermore, Australia's robust trade surplus and sustained inflows of foreign capital provide additional safety margins for the currency.

Technical Outlook for AUD/USD

On the daily chart, the AUD/USD pair is currently in a phase of weak adjustment following a retreat from highs. A previous double-top pattern formed around 0.7186 and 0.7277, with the price falling back near 0.7050, breaking below the MA20, MA50, and MA100 moving averages, indicating a short-term weakening trend. Key support is seen at 0.7000, with stronger support at 0.6832. Resistance is concentrated around 0.7092 and the moving average zone above.

Regarding technical indicators, the MACD has crossed below the zero line, forming a bearish crossover, with the green histogram releasing bearish momentum. The RSI stands at 39.49, in a neutral-to-weak zone, approaching oversold levels but not yet triggering a clear rebound signal.

In summary, the exchange rate is biased to the weak side in the short term. If it cannot firmly hold above 0.7092, it is likely to test the 0.7000 support level. A breakout above the resistance with significant volume could lead to a rebound testing the moving average pressure. The longer-term cycle still finds support from the MA200, with the current outlook being primarily weak within a range, warranting vigilance for potential fundamental disturbances.