AUD/USD drops back to 0.7450 as China’s covid fears join firmer yields, Ukraine woes

• AUD/USD refreshes intraday low while consolidating recent gains around 2022 top.
• One more city in China announced virus-led lockdown, NATO leaders highlight Russia-China ties.
• US stock futures part ways from Wall Street’s gains as Biden administration braces for more Russian sanctions.
• Fed’s Powell, second-tier US data will join risk catalysts to direct short-term moves.

AUD/USD takes offers to refresh intraday low around 0.7450 as market players reassess the previous optimism during Wednesday’s Asian session. The risk-barometer pair refreshed the highest levels since November 2021 during the day-start advances before the latest downside to renew daily low.

Worsening virus woes in China and the recent covid fears in Europe seem to have underpinned the Aussie pair’s latest pullback. Also challenging the bulls are the likely further hardships for Russia and sustained invasion of Ukraine.

A steady increase in China’s daily covid infections, recently by 2,469 versus 2,432 prior, joins the news of a virus-led lockdown in Tangshan to weigh on the market sentiment, as wel las on the AUD/USD. On the same line were chatters surrounding the faster spread of a new coronavirus variant called BA2 in Europe. Also draggin the pair prices are chatters that China will announce rate cuts during the year, per multiple China media outlets.

Elsewhere, Ukraine’s President Volodymyr Zelenskyy said, “Talks with Russia are difficult, at times confrontational.” On the other hand, war escalates in Mariupol. It’s worth observing that Moscow managed to pay the second tranche of Eurobond coupon payment in the USD and avoided default for the second consecutive time.

It’s worth observing that the Wall Street Journal (WSJ) signaled heavy sanctions for Russian lawmakers will be unveiled by US President Joe Biden’s administration on Thursday. Additionally, Nikkei tried to portray challenges for China if the Beijing-Moscow links get identified as supporting the Ukraine war. “The North Atlantic Treaty Organization (NATO) has begun coordinating to express concern about cooperation between Russia and China in a joint statement to be finalized at the emergency summit on the 24th,” said the news.

Nikkei also mentioned, “If China supports Russia in military and economic terms, Russia's invasion of Ukraine will regain momentum, and the conflict with the United States and Europe may intensify.”

Amid these plays, S&P 500 Futures print mild losses of around 4,500 whereas the US 10-year Treasury yields renew the highest levels since May 2019.

Moving on, risk catalysts are likely to remain in the driver’s seat ahead of Thursday’s NATO meet and a slew of the key US data.

Technical analysis

A nine-month-old descending resistance line precedes an upward sloping trend line from mid-January, respectively around 0.7465 and 0.7485, to limit immediate AUD/USD upside. That said, a weekly support line near 0.7410 will challenge the pair’s short-term declines.