- AUD/USD is unable to capitalize on its modest intraday gains and pulls back near the 0.7300 level.
- The worsening of the situation in Ukraine benefits the safe-haven USD and limits the rise of the pair.
- Any decline appears to be supported as investors await the resumption of talks between Russia and Ukraine.
The pair AUD/USD has given back its modest intraday gains during the first half of the European session, now trading at the lower end of its daily range just above the 0.7250 region.
The pair struggled to hold on to the ground they had gained earlier in the day and encountered fresh selling near the 0.7280 region amid a nice uptick in US dollar demand. A further escalation in the conflict between Russia and Ukraine continued to weigh on investor sentiment, which in turn was seen as a key factor benefiting the safe-haven USD.
In recent events, the news indicated that Russia has intensified the bombing of Ukrainian cities and a large Russian convoy was approaching the capital Kiev. Apart of this, a modest rebound in US Treasury bond yields acted as a tailwind for the dollar and put some downward pressure on the AUD/USD pair, although the downside seems limited.
The worsening of the situation in Ukraine seems to have now convinced investors that the Fed would refrain from adopting a more aggressive monetary policy response to combat stubbornly high inflation. This could prevent USD bulls from opening aggressive positions and lent some support to the AUD/USD pairwhich would warrant some caution before positioning for any further declines.
Investors might also prefer to wait on the sidelines and wait for the resumption of peace talks between Russia and Ukraine. Incoming geopolitical news will continue to play a key role in influencing broader market risk sentiment. This, in turn, will fuel safe-haven USD demand and could create some short-term opportunities around the AUD/USD pair.
Market participants will take further cues on Wednesday from the release of the US ADP report on private sector employment, to be released later at the start of the American session. Aside from this, Fed Chairman Jerome Powell’s semi-annual testimony before the House Financial Services Committee could provide some lift to the USD and AUD/USD.
AUD/USD technical levels
Source: Fx Street
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