- AUD/USD witnesses some continuation selling for the second day in a row on Tuesday.
- A change in risk sentiment weighs on the safe-haven USD and offers support to the pa.
- The market focuses on the war between Russia and Ukraine.
The pair AUD/USD has managed to recover a few pips from the multi-day low at 0.7266 reached earlier in the European session, still holding negative on the day just below the 0.7300 level.
The pair extended the previous day’s sharp pullback from the 0.7440 region, at four-month highs, and witnessed some continuation selling for the second day in a row on Tuesday. Given the recent strong bullish move witnessed in the past week, the drop could be attributed solely to some profit-taking. That said, a combination of factors acted as a tailwind for the AUD/USD pair and helped limit any deeper losses, at least for now.
the growing Russia’s isolation after its invasion of Ukraine has fueled fears of a supply crisis and has led to recent gains in commodity prices. This was seen as a key factor that had boosted the commodity price linked Australian dollar and could continue to support the AUD/USD pair. Apart of this, a positive shift in equity markets and some profit taking around the US dollar from the highest level since May 2022 should benefit the perceived riskier Australian dollar.
Global risk sentiment rose sharply amid news that The European Union (EU) is set to outline a plan this week to jointly issue bonds on a potentially massive scale to finance energy and defense spending.. That said, the worsening situation in Ukraine, coupled with the risk of stagflation, should cap any bullish moves in the markets. Other than this, a sharp intraday rise in US Treasury yields favors USD bulls.
The mixed fundamental backdrop warrants some caution before opening aggressive directional positions amid the absence of relevant economic releases from the US. However, the focus remains glued to the new developments around the war between Russia and Ukraine. Aside from this, the broader market risk sentiment and USD price action could provide some significant lift to the AUD/USD pair.
AUD/USD technical levels
Source: Fx Street
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