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Aussie stems slide

The Australian dollar has finally managed to stem the bleeding on Tuesday, after two days of sharp losses. In the North American session, AUD/USD is trading at 0.7225, up 0.56% on the day.

With the war continuing to rage in Ukraine, markets remain fragile and risk apprehension is high. There have been hints of slight progress in the negotiations between Ukraine and Russia which have given hope that a ceasefire can be reached, but Moscow appears determined to continue the fight, despite facing crippling sanctions from the West.

Has the Lucky Country’s luck run out for the Australian dollar? The currency enjoyed a run of five straight winning weeks, but dropped 1.13% last week and slid 1.44% on Monday before edging higher today. The surge in commodity prices had buoyed the Aussie in recent weeks but the ongoing conflict in Ukraine has sapped risk appetite and is weighing heavily on the risk-sensitive Australian dollar.  The markets remain volatile, and we can expect developments in Ukraine to have a strong impact on the direction of the Australian dollar.

Patience, please

Patience was one of the messages that the RBA minutes conveyed, with the central bank saying it would continue to be patient before raising interest rates. RBA members noted that inflation was expected to continue to rise, as supply disruptions persist. However, the minutes noted that the war in Ukraine and the rise in energy prices had “created additional uncertainty about the inflation outlook”.

RBA Governor Lowe has insisted that inflation must remain “sustainably” in the 2%-3% target range. Even though inflation is currently running at a 3.5% clip, Lowe has the luxury of being able to wait until he is convinced that a rate hike is needed to contain inflationary pressures. If inflation continues to accelerate, Lowe will be under strong pressure to raise rates, with a June lift-off a strong possibility.

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AUD/USD Technical

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher [5]

Market Analyst at OANDA [6]
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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