Executive Summary
AUD/USD trades at 0.6910, having declined approximately 2.9% over the past month from its March 11 high near 0.7186, as the Iran-US war's risk-off impulse overwhelms Australia's G10-leading rate advantage. The pair has rallied 5.9% over the past year from its April 2025 tariff-shock low near 0.5915, but the structural uptrend has been interrupted by a sharp corrective episode that has pushed spot below the 50-day SMA (0.7033) while still holding above the 200-day SMA (0.6740). The dominant bilateral narrative is a tug-of-war between the widening RBA-Fed policy rate differential (+48bps at the policy level, +66bps at the 10Y) — the widest AUD-supportive spread in over a decade — and the USD's safe-haven bid driven by the Iran conflict (VIX at 30.6, DXY at 100.5). Both dossiers agree that AUD has superior fundamentals (GDP 2.6% vs 2.0%, RBA hiking vs Fed on hold) while USD has superior tactical positioning (left side of the dollar smile, risk-off flows). Our headline stance is tactically bearish with low conviction (2/5) — the positioning unwind and risk-off dominate the near term — and strategically bullish with moderate conviction (3/5), as the carry story, external balance improvement, and PPP undervaluation of approximately 5% converge once geopolitical fog clears.