AUD/USD flirts with daily high, comfortably above 0.7200 as focus shifts to RBA on Tuesday

• AUD/USD attracted fresh buying near the 0.7160 area and reversed the initial bearish gap opening.
• Upbeat domestic data, bets for an eventual RBA rate hike in 2020 extended support to the aussie.
• A recovery in the risk sentiment undermined the safe-haven USD and contributed to the move up.

The AUD/USD pair built on its steady intraday move up and climbed to a fresh daily high, around the 0.7220-0.7225 region heading into the North American session.

Following a bearish gap opening on Monday, the AUD/USD pair attracted some dip-buying in the vicinity of mid-0.7100s and was supported by a combination of factors. The early uptick followed the upbeat release of the Australian Retail Sales data, which reaffirmed market bets for an eventual interest rate hike by the Reserve Bank of Australia in 2022. Apart from this, a recovery in the equity markets prompted some intraday selling around the safe-haven US dollar and further benefitted the perceived riskier aussie.

The initial reaction to the weekend developments surrounding the Ukraine crisis seemed short-lived, which was evident from an intraday bounce across the global equity markets. It is worth recalling that 
Western nations ramped up efforts to punish Russia for its invasion of Ukraine and imposed tough new sanctions, including cutting some of its banks off the SWIFT financial network. Moreover, Russian President Vladimir Putin upped the ante on Sunday and put the country’s strategic nuclear forces on high alert.

The market nervousness, however, eased after the Russian negotiator said that they are interested to reach an agreement with Ukraine as soon as possible. Adding to this, reports indicated that the Ukraine-Russia dialogue has already started in Belarus and Russian media is coining this as 'peace talks', raising expectations for some de-escalation of tensions. This, in turn, helped the risk sentiment to stabilize a bit and provided modest lift to the AUD/USD pair amid some repositioning trade ahead of the RBA on Tuesday.

That said, any optimistic move in the markets is likely to remain capped as the focus remains glued to fresh developments surrounding the Russia-Ukraine saga. Hence, it will be prudent to wait for some follow-through buying, possibly beyond the 100-day SMA hurdle, before positioning for any further gains amid absent relevant market moving economic releases.

Technical levels to watch