AUD/USD pares intraday losses, remains below 0.7200 mark amid Russia-Ukraine tensions

• AUD/USD witnessed a sharp pullback from a one-week high touched earlier this Thursday.
• Russia-Ukraine tensions weighed on the risk sentiment and the perceived riskier aussie.
• Bets for an RBA rate hike in 2022 extended some support and helped limit the downside.

The AUD/USD pair quickly recovered a few pips from the Asian session low and was last seen trading with modest intraday losses, around the 0.7180-0.7185 region.

Following an early uptick to a one-week low, the AUD/USD pair witnessed a turnaround from the 0.7215 region and dropped to a daily low, around mid-0.7100s amid a fresh wave of risk-aversion trade.  Reports that Ukrainian forces have fired mortars and grenades on the LPR region took its toll on the global risk sentiment, which benefitted the safe-haven US dollar and drove flows away from the perceived riskier aussie.

LPR is Luhansk People's Republic located in Luhansk Oblast in the Donbas region, a territory internationally recognized to be a part of Ukraine but run by Russian backed separatists. This comes amid doubts on Russia's claim of a military pullback from the Ukraine border, which revived fears of an imminent Russian invasion of Ukraine. In fact, the United States and NATO said that there were no signs of de-escalation on the ground.

The downside, however, remains cushioned, at least for now, amid rising bets for an interest rate hike by the Reserve Bank of Australia (RBA). Economists at two of Australia's major lenders - Australia & New Zealand Banking Group Ltd. and Commonwealth Bank of Australia - said called for the first-rate increase by September 2022. Apart from this, a positive surprise from the domestic jobs data, showing that the number of employed people rose by 12.9K in January, acted as a tailwind and helped limit losses for the AUD/USD pair.

Market participants now look forward to the US economic docket, featuring the releases of the Philly Fed Manufacturing Index, Weekly Initial Jobless Claims and housing market data. The focus, however, will remain on geopolitical developments, which will play continue to play a key role in influencing the broader market risk sentiment. This, along with the USD price dynamics, should produce some trading opportunities around the AUD/USD pair.

Technical levels to watch