Australian dollar slips to 2-week low

The Australian dollar continues to lose ground. After falling 0.91%  on Friday, AUD/USD is down 0.68% on Monday and is trading at 0.7238. Earlier in the day, the Australian dollar dropped to 0.7222, its lowest level since February 28^th.

Aussie hampered by risk aversion

It was a tough week for the Australian dollar, which lost more than 1%, and the currency is down considerably on Monday. Risk appetite remains weak and the markets have been volatile as the Ukraine war continues. There have been some hints of slight progress in the negotiations but the Russians continue to pound Ukrainian targets, both military and civilian. If a ceasefire is agreed to, it would boost risk sentiment and the Aussie would likely recover some of its recent losses.

The Australian dollar is risk-sensitive, but nonetheless had an impressive run of five straight winning weeks until last week. The primary driver for this upswing was been the massive surge in commodity prices. Australia exports a range of commodities which has boosted the export sector as well as the Australian dollar. However, risk apprehension remains high and if the Ukraine crisis deteriorates, such as a clash between NATO and Russian forces, the Aussie could get hit hard.

The US dollar recorded broad gains on Friday, as investors preferred to avoid risk over the weekend. On Friday, the dollar index rose 0.60% to 99.12. The index has dipped to 98.93, in the middle of the range of 98.50 – 99.50. A break above 99.50 will would provide room for the US dollar to rise, while a fall below 98.50 would cloud the bullish outlook for the greenback.

Investors are awaiting the RBA minutes from the March meeting, which will be released on Tuesday. Any clues as to future rate hikes could have a strong impact on the Australian dollar. The RBA maintained the cash rate at that meeting, but rising inflation and a strong economic recovery are putting pressure on the RBA to raise rates, which could press the trigger as early as June.

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AUD/USD Technical

• AUD/USD is putting pressure on support at 0.7212. Below, there is support at 0.7131
• There is resistance at 0.7408 and 0.7523

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