AUD/USD sticks to gains near weekly high, just above 0.7200 amid positive risk tone

The AUD/USD pair retreated a few pips from the weekly high touched earlier this Friday and was last seen trading just above the 0.7200 mark, still up over 0.35% for the day.

Following the previous day's modest losses, the AUD/USD pair attracted fresh buying on the last day of the week and build on the recent bounce from the 0.7085 region, or the weekly low touched on Monday. The US Secretary of State Antony Blinken accepted an invitation to meet Russian Foreign Minister Sergei Lavrov late next week and raised hopes for a diplomatic solution to the Ukraine crisis. This led to a modest recovery in the global risk sentiment, which undermined the safe-haven US dollar and benefitted the perceived riskier aussie.

The greenback was further pressured by the uncertainty about the pace of the Fed's policy tightening cycle, especially after the release of less hawkish FOMC minutes on Wednesday. In fact, policymakers failed to reinforce bets for a 50 bps rate hike in March, though agreed that it would be appropriate to remove policy accommodation at a faster pace. Moreover, the geopolitical developments could force the Fed to adopt a less aggressive policy stance. Apart from this, rising bets for an eventual RBA rate hike in 2022 extended support to the AUD/USD pair.

Investors, however, remain concerned about the possibility of an imminent Russian invasion of Ukraine. British Foreign Secretary Liz Truss dismissed Russia's claims that it is withdrawing troops and said that the buildup around Ukraine has shown no signs of slowing down. Adding to this, US President Joe Biden accused Russia of fabricating a pretext to invade Ukraine. This might keep a lid on the market optimism. Nevertheless, the AUD/USD pair remains on track to end on a positive note and record gains for the third successive week.

Market participants now look forward to the US Existing Home Sales data, due for release later during the early North American session. This, along with fresh geopolitical developments and the broader market risk sentiment, will influence the USD and produce some trading opportunities around the AUD/USD pair.

Technical levels to watch