- AUD/USD witnessed some follow-through selling for the second successive day on Tuesday.
- A turnaround in the risk sentiment undermined the safe-haven USD and extended support.
- The market focus remains on the Russia-Ukraine saga amid absent relevant macro releases.
The AUD/USD pair managed to recover a few pips from the multi-day low and was last seen trading just below the 0.7300 mark, still down over 0.30% for the day.
The pair extended the previous day's sharp retracement slide from the 0.7440 region, or over four-month high and witnessed some follow-through selling for the second successive day on Tuesday. Given the recent strong rally witnessed over the past one week or so, the downfall could be solely attributed to some long-unwinding trade. That said, a combination of factors acted as a tailwind for the AUD/USD pair and helped limit any deeper losses, at least for the time being.
Russia's growing isolation after its invasion of Ukraine has fueled fears of supply crunches and led to the recent monster gains in commodity prices. This was seen as a key factor that had boosted the resources-linked Australian dollar and might continue to lend support to the AUD/USD pair. Apart from this, a positive turnaround in the equity markets and the US dollar profit-taking slide from the highest level since May 2022 should benefit the perceived riskier aussie.
The global risk sentiment got a strong lift amid a report that the European Union (EU) is set to outline a plan this week to jointly issue bonds on a potentially massive scale to finance energy and defence spending. That said, the worsening situation in Ukraine, along with the risking risk of stagflation, should keep a lid on any optimistic move in the markets. Apart from this, a sharp intraday spike in the US Treasury bond yields favours the USD bulls.
The mixed fundamental backdrop warrants some caution before placing aggressive directional bets amid absent relevant market moving economic releases from the US. Nevertheless, the focus remains glued to fresh developments surrounding the Russia-Ukraine saga. Apart from this, the broader market risk sentiment and the USD price dynamics should provide some meaningful impetus to the AUD/USD pair.
