AUD/USD eyes further losses towards 0.7200 as China, Fed fears join Ukraine-Russia crisis
- AUD/USD extends Friday’s losses below short-term key support, renews intraday low.
- China’s covid conditions worsen, US Treasury yields hit multi-day high on record top inflation expectations.
- Recent Russian attacks raise doubts about Moscow-Ukraine peace talks.
- RBA Minutes, Aussie job numbers and the Fed’s verdict will also be crucial catalysts to watch for fresh impulse.
AUD/USD renews intraday low around 0.7250, down 0.48% on a day as market sentiment sours heading into Monday’s European session.
The risk barometer justifies the market’s recently grim concerns, as well as anxiety ahead of this week’s key Federal Open Market Committee (FOMC).
The brighter progress on the Ukraine-Russia peace talks couldn’t recall AUD/USD buyers as the latest Russian shelling and demands for Kyiv to step back, as well as Ukraine’s push for more sanctions on Moscow. On the same line could be comments from International Monetary Fund Managing (IMF) Director Kristalina Georgieva who said during the CBS's "Face the Nation" program that Russia may default on its debts in the wake of unprecedented sanctions over its invasion of Ukraine, but that would not trigger a global financial crisis, per Reuters.
Elsewhere, China reports the highest daily covid infections since May 2020 and announced harsh lockdowns in two states, recalling the virus woes and weighing on the AUD/USD prices.
Also challenging the quote is the US Treasury yields’ strength as the 5-year bond coupon renew all-time high above 2.0% amid record inflation expectations, per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data.
Amid these plays, S&P 500 Futures pare early Asian session gains and so do the ASX 200. Further, Chinese stocks are on the back foot even as markets expected the People’s Bank of China’s (PBOC) rate cut.
Hence, risk-aversion may weigh on the AUD/USD prices for a little more until the commodities renew upside momentum, which is less likely considering challenges for China. Even so, a light calendar and anxiety ahead of this week’s FOMC may allow the quote to pare the latest losses should the Aussie jobs report match upbeat forecasts and the RBA Minutes also confirm the recent comments from Governor Philip Lowe, supporting a rate hike by the end of 2022.
Technical analysis
A clear downside break of convergence of the 100-SMA and 50% Fibonacci retracement (Fibo.) of the pair’s late February to early March moves, around 0.7270, directs AUD/USD sellers towards 0.7245 and 61.8% Fibo. level near 0.7225.