- AUD/USD failed to capitalize on its modest intraday gains, falling back closer to the 0.7300 mark.
- The worsening situation in Ukraine benefitted the safe-haven USD and capped aussie upside.
- Any downside seems cushioned as investors await the resumption of Russia-Ukraine talks.
The AUD/USD pair surrendered its modest intraday gains during the first half of the European session and was last seen hovering near the lower end of its daily trading range, around mid-0.7200s.
The pair struggled to preserve the ground it had taken earlier in the day and met with a fresh supply near the 0.7280 region amid a goodish pickup in US dollar demand. A further escalation in the conflict between Russia and Ukraine continued weighing on investors' sentiment, which, in turn, was seen as a key factor that benefitted the safe-haven greenback.
In the latest developments, reports indicated that Russia has intensified the bombardment of Ukrainian cities and a large Russian convoy was approaching the capital Kyiv. Apart from this, a modest rebound in the US Treasury bond yields acted as a tailwind for the buck and exerted some downward pressure on the AUD/USD pair, though the downside seems limited.
The worsening situation in Ukraine now seems to have convinced investors that the Fed would refrain from adopting a more aggressive policy response to combat stubbornly high inflation. This might hold back the USD bulls from placing aggressive bets and lend some support to the AUD/USD pair, warranting some caution before positioning for any further decline.
Investors might also prefer to wait on the sidelines and wait for the resumption of the Russia-Ukraine peace talks. The incoming geopolitical headlines will continue to play a key role in influencing the broader market risk sentiment. This, in turn, will drive demand for the safe-haven USD and produce some short-term trading opportunities around the AUD/USD pair.
Market participants on Wednesday will further take cues from the release of the US ADP report on private-sector employment, due later during the early North American session. Apart from this, Fed Chair Jerome Powell's semi-annual testimony before the House Financial Services Committee could provide some impetus to the USD and the AUD/USD pair.
Technical levels to watch
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