- A combination of factors pushed AUD/USD to a two-week high on Tuesday.
- The RBA’s rate hike bets acted as a tailwind amid the onset of fresh USD selling.
- A shift in risk sentiment further benefited the perceived riskier Aussie.
The pair AUD/USD it maintained its strong offered tone heading into the American session and was last seen near the 0.7215 region, just below a two-week high.
After an early drop to the 0.7170 area, the AUD/USD pair regained positive traction for the second day in a row and was supported by a combination of factors. Growing bets on an eventual interest rate hike by the Reserve Bank of Australia acted as a tailwind for the national currency. Apart from this, the renewed selling of the US dollar provided an additional boost to the Australian dollar perceived as more risky.
Nervousness over the worsening situation in Ukraine subsided after a Kremlin spokesman said Russia is still open to diplomacy and has an interest in it. This, in turn, led to a strong rally in equity markets and drew flows away from traditional haven assets, including the dollar. However, sentiment remains fragile amid the risk of a further escalation in the Ukraine crisis.
Russian President Vladimir Putin upped the ante on Monday by recognizing two breakaway regions in eastern Ukraine as separate entities and sending troops to keep the peace. This fueled fears about a full-blown East-West conflict that could trigger a major war. Indeed, British Prime Minister Boris Johnson has imposed sanctions on five Russian banks and banned three people from traveling to the UK.
The United States is also expected to announce new sanctions against Russia, which should contain any bullish moves in the markets. This, coupled with a solid rally in US Treasury yields, should act as a tailwind for the dollar and cap the upside for the AUD/USD pair. Therefore, it will be wise to wait for some follow-on buying before positioning for any further appreciation moves.
Even from a technical perspective, the AUD/USD has, thus far, struggled to break above the 100-day SMA. Said barrier coincides with the monthly high, around 0.7250, which if decisively removed, will be seen as a new trigger for bullish traders. The momentum could push prices past intermediate resistance near the 0.7275-0.7280 area, towards the recovery of the round 0.7300 level.
Additional technical levels
Source: Fx Street
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