AUD/USD pulls back below 0.7200, trims daily gains

• Aussie recovery stops at 0.7225, pair returns below 0.7200.
• Australian dollar loses strength as market sentiment worsens.
• Back below 0.7200, AUD/USD keeps short-term bearish bias intact.

The AUD erased earlier gains during the US trading session on Tuesday, pulling back below 0.7200 after hitting intraday highs at 0.7225. The pair AUD/USD remains sideways on the daily chart, quoting at 0.7185 at the time of writing.

USD Recovers Lost Ground as Market Sentiment Sours

The risk-sensitive Australian dollar has lost ground as hopes for progress in Russia-Ukraine peace talks faded for the second day in a row. The market’s fragile optimism has been shattered after Russian President Vladimir Putin accused Ukrainian representatives of not taking the search for a mutually acceptable solution seriously.

The market has been rocked by these comments. US stock markets pulled back from session highs and the US dollar rallied on safe-haven demand. Beyond that, the Federal Reserve is widely expected to raise rates for the first time in three years on Wednesday, which is helping to keep US dollar weakness in check.

Earlier today, AUDUSD has tried to cut losses, after the sell-off of the last two days. Positive Chinese data, with industrial production and retail sales beating expectations in February, and a somewhat weaker dollar had been boosting demand for the Australian dollar.

AUD/USD capped below 0.7225 resistance

From a technical point of view, the pair keeps its short-term bearish bias intact as the upside correction has been limited to the 0.7225 area, where previous intraday support meets the 100-day SMA.

On the downside, below 0.7200, the pair eyes the aforementioned 2-week low at 0.7165 before Feb 28 low at 0.7140.

Conversely, another bullish reaction should break 0.7225 before targeting 0.7245 (low 8 Mar) and the 200-Day SMA at 0.7310 before targeting 10 Mar 11 highs at 0.7365.

Technical levels