AUD/USD flat-lined around mid-0.7300s as focus remains on Russia-Ukraine crisis
- AUD/USD reversed an Asian session dip, though the uptick lacked any follow-through buying.
- The Ukraine crisis, stronger US CPI acted as a tailwind for the USD and capped gains for the pair.
- The focus will remain glued to the geopolitical headlines surrounding the Russia-Ukraine saga.
The AUD/USD pair seesawed between tepid gains/minor losses heading into the European session and was last seen trading around mid-0.7300s, nearly unchanged for the day.
Worries about the worsening situation in Ukraine continued weighing on investors' sentiment, which was evident from the prevalent cautious mood in the financial markets. This, in turn, exerted some downward pressure on the perceived riskier aussie during the early part of trading on Friday. That said, subdued US dollar demand assisted the AUD/USD pair to attract some buying near the 0.7330-0.7325 region.
The buck was undermined by modest downtick in the US Treasury bond yields, though a combination of factors acted as a tailwind. The lack of progress in the Russia-Ukraine ceasefire talks, along with a further escalation of conflict between Russian and the West should keep a lid on any optimistic move in the markets. Apart from this, Thursday's strong US CPI print shot should lend support to the USD.
In the latest developments, Russia approved a list of goods and equipment that are temporarily prohibited from being exported in retaliation to Western sanctions imposed over its military operations in Ukraine. Furthermore, US President Joe Biden is set to call for an end of normal trade relations with Russia later this Friday, alongside the Group of Seven nations and European Union leaders.
Meanwhile, the headline CPI accelerated to a new 40-year high level and added to worries about a major inflationary shock. The data reinforced bets for an imminent start of the policy tightening by the Fed in March, which led to the overnight spike in the US Treasury bond yields. This, in turn, favours the USD bulls and warrants caution before placing bullish bets around the AUD/USD pair.
Market participants now look forward to the release of the Prelim Michigan US Consumer Sentiment Index, due later during the early North American session. The focus, however, will remain on the incoming geopolitical headlines, which, along with the US bond yields, would influence the USD price dynamics. This should assist traders to grab some short-term opportunities around the AUD/USD pair.
Technical levels to watch