On Tuesday, 15 February, the Aussie is trading in red for the fourth straight day during the Asian session.
- Reserve Bank of Australia is anticipated to start lifting the cash rate in June, rather than their earlier prediction of a move in August.
- Market mood is deteriorating as tensions between Ukraine and Russia escalate.
- A variety of US statistics and Fedspeak will be added to the mix; risk catalysts are the most important factor.
AUDUSD fundamental forecast
The Australian Dollar is marking time as global markets await the outcome of events in Ukraine, although energy and commodities prices boosted the Aussie. After recovering from a low of $0.7086 overnight, the Australian Dollar holds steady at $0.7130.
Dovish RBA
The RBA has released the minutes of its most recent meeting and said that interest rates would not be raised until the inflation objective is fulfilled. The RBA is prepared to wait but cautions that inflation has accelerated sooner than projected. According to the minutes, the RBA’s Board of Directors was unsure that the increase in inflation would be maintained and wanted to observe how wages responded before acting on interest rates.
US treasury drops
The US Treasury yields are reinforcing the previous day’s recovery moves with a new decrease to 1.979%, down 1.7 basis points, while the USA500 Futures show minor losses at the time of writing. Despite a somewhat good week-start performance, bond coupons recovered upside momentum on Monday after falling back from a 2.5-year peak on Friday, while the Wall Street benchmark finished in the negative.
Russia-Ukraine situation intensifies
The United States State Department has announced that its embassy in Kyiv will be relocated to Lviv, in western Ukraine. It comes after Joe Biden warned that Russia will suffer a “protracted crisis if Ukraine is attacked.” There is, however, an opportunity for a knee-jerk reaction from markets if a dispute breaks out. As a result, traders may hurry to get their hands on the Greenback.
Key Data Releases
From down under, there is no significant news today from Australia. Tomorrow Employment Change and Unemployment Rate are due to be released. In US, PPI will be released on Thursday. Then, later in the week, there is Core Retail Sales, and Fed officials will also speak.
What’s next?
Traders of the AUDUSD pair will watch risk catalysts in the future. For example, the US Producer Price Index (PPI) for January is expected to rise 9.1% YoY vs. 9.7% before. Likewise, the Empire State Manufacturing Index for February is expected to rise 12% versus -0.7% previously.
AUDUSD is now traveling in a tight range between 0.7100 and 0.7107. So far, the pair has lost -0.30% since the start of the day. The pair is below its 100-day moving average on the daily chart, and the RSI is pointing downwards. AUDUSD is now hitting the 0.7106 level. A fall below 0.7088 will bring the pair towards the 0.7054 support level. If Aussie falls below this level again, it will challenge the next support level, at 0.7023.
On the upside, the Aussie could go towards the next resistance level, around 0.7153. A break over the resistance level of 0.7184 will pave the way for a test of the following resistance level of 0.7128.
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Adnan Rehman
Regional Market Analyst
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