AUD/USD grinds higher around 0.7250 on China PMI, Ukraine, RBA eyed

• AUD/USD consolidates recent losses at multi-day top, renews intraday low of late.
• China NBS Manufacturing PMI rose past market forecast, prior in February, Non-Manufacturing PMI improved too.
• S&P 500 Futures, US Treasury yields print mild gains amid lackluster markets, mixed updates concerning Russia-Ukraine.
• RBA is likely to keep the rate unchanged, US data, Biden’s speech will be important too.

AUD/USD extends bounce off intraday low to 0.7265 after China released upbeat activity data for February during Tuesday’s Asian session. In doing so, the Aussie pair rises for the third consecutive day.

China’s headline NBS Manufacturing PMI for February rose to 50.2 versus 49.9 expected and 50.1 prior. Further, the Non-Manufacturing PMI crossed 51.1 previous readouts with 51.6 figures for the stated month.

Earlier in the day, Australia's Current Account Balance for Q4 eased to 12.7B versus 14.9B forecasts and 23.9B prior. Further, Home Loans and Investment Lending For Homes flashed mixed numbers as the former eased to 1.0% whereas the latter rallied to 6.1% in January. Also from Australia were activity numbers from AiG and Commonwealth Bank (CBA) for February, both of which remained above 50.00 but the CBA gauge eased.

AUD/USD portrayed a heavy recovery on Monday as the risk-barometer pair not only filled the week-start gap but also refreshed multi-day high by the end of the day. The US dollar weakness and firmer gold prices could be linked to the quote’s latest gains. However, looming concerns over Russia and Ukraine join the market’s inflation woes to test the pair buyers of late.

The US Dollar Index tracked downbeat US Treasury yields to consolidate February’s gains during the last few days. US 10-year Treasury yields dropped the most since early December 2021 the previous day mainly due to the receding hawkish mood at the Fed and downbeat inflation expectations.

That said, US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, don’t comply with the recently easing Fed chatters as the gauge jumped to the highest since November 23, marked a 2.62% figure by the end of Monday’s North American session. It should be noted that the CME’s FedWatch Tool marked nearly 5.0% probabilities of a 0.50% Fed rate hike in March, versus more than 50% before a few days. While considering this, Atlanta Fed President Raphael Bostic said on Monday, “Today I am in favor of a 25 bps move at March meeting."

Talking about geopolitics, imagery company Naxar recently mentioned Russian troops' length of around 40 miles near Ukraine’s capital Kyiv. On Monday, negotiations between Russia and Ukraine concluded without any core results, as expected. The diplomats assured further talks during this week but Moscow isn’t ready to step back as Russian troops bombard civilian buildings in Kyiv. On the other hand, Ukraine President Zelenskyy was quoted by Reuters’ reporter Phil Stewart to consider a no-fly zone for Russian missiles, planes and helicopters. The same would push the US to jump into the battle, as signaled earlier by the White House (WH). However, the WH press secretary Jen Psaki on Monday ruled out the idea of using US troops to create a no-fly zone over Ukraine amid the Russian invasion of the eastern European country.

Looking forward, AUD/USD traders will keep their eyes on the Reserve Bank of Australia’s (RBA) Monetary policy meeting as the Aussie central bank has repeatedly refrained from being hawkish despite reflation fears. Should the RBA reiterates the dovish bias, the risk-barometer pair may witness further downside.

Read: Reserve Bank of Australia Preview: Inflationary pressures and wage growth take center stage

Technical analysis

Despite the latest pullback from a downward sloping resistance line from mid-November 2021, around 0.7275 at the latest, AUD/USD stays beyond the 100-DMA level of 0.7237 for the first time in four months. Hence, the Aussie pair’s further selling hinges on a clear downside break of the key DMA.