- AUD/USD consolidates recent gains around multi-day high as markets turn cautious ahead of the day’s key catalysts.
- Risk appetite improved previously on hopes of Russia-Ukraine peace talks, ceasefire.
- Fed’s Powell sounds hawkish but didn’t push more for 0.50% rate-hike.
- Australian housing, trade numbers will precede China’s Caixin Services PMI to decorate the calendar in Asia.
AUD/USD remains mildly offered around a six-week high, recently bouncing off an intraday low of 0.7290, as Thursday’s sluggish Asian session triggered profit booking.
The risk barometer pair refreshed multi-day top the previous day as market sentiment improved on hopes of a ceasefire between Ukraine and Russia. Also favoring the pair bulls was Fed Chair Jerome Powell’s bi-annual hearing of Monetary Policy Report in front of the House Financial Services Committee. Additionally, upbeat figures of Australia’s Q4 GDP also played their roles to favor the pair’s upside momentum on Wednesday. The recent pullback, however, could be termed as a sign of cautious mood among the traders as markets approach key data/events.
Interfax quoted a Russian negotiator while saying, “A potential ceasefire will be discussed in upcoming talks with the Ukrainian delegation.” On the same line were other Russian media reporting the probabilities of the next round of peace talks on Thursday.
Further, Fed Chair Jerome Powell’s bi-annual testimony was slightly hawkish as it conveyed inflation concerns and showed readiness to lift the Fed rate by 0.50% if needed. However, the base case was a series of rate hikes starting with 25 basis points (bps) of a push in March, which in turn joined recently easing market bets for a faster rate-lift series to favor the risk-on mood.
Australia’s fourth quarter (Q4) GDP joined mild risk-on mood to help the AUD/USD pair. That said, Australia’s fourth quarter (Q4) GDP rose past 3.0% forecasts and -1.9% prior to 3.4% QoQ. Further, the YoY number rallied to 4.2% versus 3.7% expected and 3.9% previous readouts. On the other hand, US ADP Employment Change rose past 388K forecast to 475K for February, which in turn raised hopes for a firmer US Nonfarm Payrolls (NFP) when released on Friday.
Alternatively, Russian military force’s aggression and China’s terming of Moscow’s action in Ukraine as “war” versus the previous terminology of a “special operation”, per Bloomberg as it quoted China’s Foreign Minister Wang Yi, tested market sentiment. On the same line was the global rating agency Fitch’s downgrading of Russia’s Long-Term Foreign Currency Issuer Default Rating (IDR) to 'B' from 'BBB'.
Against this backdrop, the US 10-year Treasury yields snapped a two-day downtrend to mark a stellar run-up of 17 bps to 1.878% whereas Wall Street benchmarks also rose notably by the end of Wednesday’s North American session. That said, the S&P 500 Futures drop 0.15% at the latest.
Looking forward, a slew of data is expected to be rolled out in the US session comprising ISM Services PMI, Factory Orders, Nonfarm Productivity, etc. However, Australia’s Trade Balance for January, expected 9050M versus 8356M prior, will join the Aussie Building Permits for the said month, prior -7.5%, as well as China’s Caixin Services PMI for February, market forecast 53 versus 51.4 prior, to offer fresh impulse. Above all, risk catalysts and Thursday’s Ukraine-Russia talks will be crucial.
Technical analysis
Although the 100-DMA restricts short-term AUD/USD downside near 0.7235, bulls need validation from January’s high and the 200-DMA, respectively around 0.7315 and 0.7325, to keep reins.