AUD/USD jumps to fresh monthly high, breaks through 100-DMA barrier amid risk-on

• AUD/USD gained traction for the third straight day and shot to a fresh monthly high on Wednesday.
• The risk-on impulse, RBA rate hike bets underpinned the perceived riskier aussie amid weaker USD.
• The Russia-Ukraine saga, rising US bond yields should revive the USD demand and cap the upside.

The USD witnessed some selling during the first half of the European session and pushed the AUD/USD pair to a fresh monthly high, around the 0.7260-0.7265 region in the last hour.

The pair gained follow-through traction for the third successive day on Thursday and was supported by a combination of factors. Despite a slight disappointment from Australian wage growth data, bets for an eventual interest rate hike by the Reserve Bank of Australia acted as a tailwind for the domestic currency. Adding to this, the upbeat market mood undermined the safe-haven US dollar and provided an additional boost to the perceived riskier aussie.

The nervousness over the worsening situation in Ukraine eased after a Kremlin spokesperson said on Tuesday that Russia is still open to diplomacy and has an interest in that. Apart from this, the fact that new economic sanctions on Russia were not as bad as feared further boosted investors' confidence. This was evident from a generally positive tone around the equity markets, which drove flows away from traditional safe-haven currencies, including the buck.

The latest leg up could further be attributed to some technical buying above the 100-day SMA barrier near the 0.7240 region. Any further move up, however, seems limited amid the risk of an imminent Russian invasion of Ukraine. This, along with a fresh leg up in the US Treasury bond yields, should assist the greenback to attract some dip-buying at lower levels and cap gains for the AUD/USD pair amid absent relevant market moving economic releases.

Technical levels to watch