AUD/USD retreats from 0.7400 as Russia-Ukraine updates test bulls

• AUD/USD pauses after a three-day uptrend near the fortnight high.
• Market’s initial risk-on mood fades amid fears of likely chemical weapon use by Russia, OECD forecasts also weigh on sentiment.
• Aussie jobs report, firmer gold prices and softer USD all favored bulls previously.
• The absence of major data highlights risk catalysts for fresh impulse.

AUD/USD is all set to reverse the previous week’s losses, despite the latest pullback from a two-week high to 0.7380 during early Friday morning in Asia.

The risk-barometer pair rose in the last three consecutive days amid rising hopes of the Ukraine-Russia peace and the US dollar’s failure to cheer Fed’s rate-hike, as well as upbeat Aussie jobs report. Also adding to the pair’s upside momentum was the news suggesting some traders’ receipt of bond coupon payment due this week in USD. However, another credit rating downgrade of Moscow and fears that Vladimir Putin’s forces may use chemical weapons recently probed bulls amid a light calendar.

No clear progress on the 15-point peace plan negotiations between Russia and Ukraine signals an upcoming top-tier gathering of Russian President Putin and his Ukrainian counterpart Volodymyr Zelenskyy, adding to the market's hopes of a solution. However, the recent fears raised by the Western experts that Moscow may contemplate the use of nuclear weapons dim the optimism. Ukraine is brokering a deal for the key meeting, for which an official confirmation is left pending, which if confirmed can help the risk appetite and AUD/USD prices.

Elsewhere market sentiment improved as the US Treasury yields and the US dollar remained on the back foot, following the Fed’s widely anticipated rate hike and Fed Chairman Jerome Powell’s hopes of easy inflation. The same favored gold prices to rise for the second consecutive day and underpin the AUD/USD run-up.

Also, upbeat prints of Australia’s February month jobs report and mixed US data, as well as upbeat Wall Street performance, offered additional help to the Aussie.

It’s worth noting that China’s step back from previously hawkish comments to ease regulatory crackdown on the property and IT companies joined Ukraine-Russia fears to challenge the bulls. On the same line were comments from the Organisation for Economic Cooperation and Development (OECD) that the global economic growth will be more than 1% lower this year due to the Ukraine crisis.

Looking forward, Friday’s economic calendar doesn’t carry any major data/events, which in turn may allow AUD/USD prices to end the week on easy flow. However, the geopolitical and covid updates remain important for the pair traders to watch.

Technical analysis

Although the 200-DMA puts a floor under the AUD/USD prices around 0.7300, upside momentum remains capped below an ascending trend line from January 13, close to the 0.7400 threshold by the press time.