AUD/USD extends gains as tensions in the Middle East overshadow Fed Powell's hawkish comments

• AUD/USD extends its recovery above 0.6500 as easing tensions in the Middle East reduce demand for the safe-haven US Dollar.
• Fed Chair Jerome Powell reiterates a data-driven approach on his testimony to Congress, but his hawkish remarks fail to lift the Greenback.
• Risk sentiment improves following Israel-Iran ceasefire, lifting AUD/USD back into the confines of a rising wedge pattern on the daily chart.

The Australian Dollar (AUD) continues to strengthen against the United States Dollar (USD) on Tuesday as traders react to signs of easing geopolitical tensions. 

Reports confirming a ceasefire between Israel and Iran have helped calm market nerves, prompting a shift back into risk-sensitive assets.

At the time of writing, AUD/USD is trading above the 0.6500 handle, buoyed by fading demand for traditional safe-haven assets, such as the US Dollar.

In Washington, Federal Reserve (Fed) Chair Jerome Powell began his two-day testimony before Congress. His tone remained broadly consistent with recent commentary, emphasizing a data-driven approach while acknowledging progress on inflation. 

Powell reiterated that the Fed is not in a rush to lower interest rates, although the door remains open if incoming data supports such a move.

AUD/USD rises above 0.6500, trading within the confines of the rising wedge

After breaching the lower boundary of the rising wedge formation on Monday, AUD/USD found support near the 200-day Simple Moving Average (SMA) at 0.6420. 

Since then, the pair has climbed back within its rising wedge formation on the daily chart. With AUD/USD prices currently trading above the psychological support level of 0.6500, the next level to watch is resistance at 0.6549.

This aligns with the 61.8% Fibonacci retracement of the September-April decline, which has capped the upside gains for AUD/USD throughout the month.

AUD/USD daily chart

A confirmed breakout above this area would open the door toward 0.6700, the next zone of psychological resistance.

In contrast, a move below 0.6500 could see prices pull back toward the 200-day SMA near 0.6420 and toward 0.6400. Below that, the 100-day SMA may provide additional support at a level of 0.6365.

With the Relative Strength Index (RSI) currently near 54, momentum is trading with a slightly bullish bias, above the neutral zone of 50.

Markets will keep a close eye on Powell's second round of testimony on Wednesday. However, unless there is a shift in tone or unexpected economic data, geopolitical calm is likely to remain a key driver of AUD/USD in the short term.