US pursues ‘diplomacy and deterrence’ in Ukraine / Russian crisis

The United States says the standoff with Moscow over Ukraine can still be resolved diplomatically and risk appetite is recovering at the start of the week enabling pairs, such as AUD/USD, to correct from Friday's bearish closing prices.

However, while the US was prepared to engage in diplomacy, “we are equally prepared for other scenarios”, US president Joe Biden said. Should there be a Russian invasion of Ukraine, it risks the largest military operation on land in Europe since 1945.

In this regard, both Biden and Russian president Vladimir Putin talked by phone for an hour on Saturday in what is widely seen as a last-ditch effort to fend off a Russian invasion of Ukraine. The call, however,  brought “no fundamental change” to the worsening crisis according to a senior US official, briefing reporters. The official said told reporters that the US and Russia have agreed to stay engaged in the coming days “but Russia may decide to proceed with military action anyway.” 

President Biden also spoke with his Ukrainian counterpart Volodymyr Zelenskyy, with the pair agreeing on the need to pursue “diplomacy and deterrence,” the White House said. A readout of the call states that “the two leaders agreed on the importance of continuing to pursue diplomacy and deterrence in response to Russia’s military build-up on Ukraine’s borders.”

Meanwhile, AUD/USD, a pair that trades as a proxy to equity markets, is attempting to correct on the hourly chart, buoyed by prospects of diplomacy, retesting the W-formation's neckline as follows:

However, the situation over Russia is fluid and markets will be on a knife's edge in anticipation of meetings between leaders of all nations involved. Meanwhile, Ukraine has been reported to have requested a meeting within the next 48 hours with Russia and other members of a key European security group.