AUD/USD flirts with 0.7200 on RBA Minutes, China data, Ukraine eyed

• AUD/USD pokes intraday high, snaps two-day downtrend while bouncing off a fortnight low.
• RBA Minutes reiterate rejection for rate-hike, cites Ukraine war as a major uncertainty but suggests economic pick-up.
• Market sentiment improves despite China’s covid announcements as Ukraine hints at sooner peace agreement with Russia.
• China Retail Sales, Industrial Production for February will offer immediate direction, risk catalysts are the key.

AUD/USD holds onto the mild gains printed during the early Asian session while making rounds to 0.7200 after the RBA Minutes on Tuesday. That said, The Aussie pair prints 0.7205 as a quote to rise 0.21% on a day by the press time.

As per the latest Reserve Bank of Australia (RBA) Monetary Policy Meeting Minutes, the “Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 percent target band.” The minutes statement also highlighted Ukraine war as a major uncertainty despite expecting pick-up in economic activities.

Read: RBA Minutes: Will not riase cash rate until price is sustainably in the 2-3% target band

Although the RBA Minutes weren’t so exciting, Australia Housing Price Index for Q4 and mild risk-on mood favor the AUD/USD buyers of late.

Australia’s House Price Index rose past 3.9% expected to 4.7% QoQ, as well as crossing 21.7% prior to 23.7% YoY.

Market sentiment improved as Sputnik quotes an Adviser to Ukraine President Volodymyr Zelenskyy’s office, Oleksiy Arestovych, to raise expectations of a Moscow-Kyiv peace as early as two weeks or before late May. On the same line were the latest comments from Ukraine President Zelenskyy who said that the peace talks with Russia will continue on Tuesday, following an abrupt pause on Monday.

On the contrary, reports of a Russian drone over Poland and sanctions on Moscow, as well as Russia-Belarus rejection to pay energy supplies in the USD, challenge the mood. Also weighing on the risk appetite is the news that China announced activity restrictions in Langfang city near Beijing, due to the covid outbreak. The dragon nation witnesses heavy daily infection numbers and raise fears of another COVID-19 wave as the latest figures were the highest since May 2020.

It should be noted that market sentiment soured on Monday, after an initially positive mood, as optimism surrounding the Ukraine-Russia peace ebbed, also joined by the news of coronavirus resurgence in China. Also challenging the AUD/USD prices were firmer yields on hopes of a faster rate-hike trajectory by the US Federal Reserve (Fed).

Against this backdrop, the S&P 500 Futures rise 0.22% to snap a three-day downtrend while the US 10-year Treasury yields seesaw near the highest levels since July 2019, around 2.14% by the press time.

Moving on, AUD/USD traders will keep their eyes on the Ukraine-Russia headlines for fresh impulse while China’s Retail Sales and Industrial Production for February, expected 3.0% and 3.9% YoY versus 1.7% and 4.3% respectively, could direct immediate moves.

Technical analysis

Despite the latest rebound, AUD/USD prints the first daily closing below the 100-DMA in over two weeks and the most bearish MACD signals since early February, which in turn keeps sellers hopeful.

That said, an upward sloping support line from late January, around 0.7180 at the latest, will challenge short-term sellers. Meanwhile, recovery moves remain elusive until providing a daily close beyond the 100-DMA, at 0.7222 by the press time.