China NBS Manufacturing PMI rose above market forecasts, prior to February, and Non-Manufacturing PMI also improved.
S&P500 Futures, US Treasury yields print slight gains amid weak markets, mixed updates regarding Russia-Ukraine.
RBA will likely keep the rate unchanged. US data and Biden’s speech are important.
After China released positive activity data for February, the AUD/USD extended its bounce to 0.7265 from an intraday low. This was after Tuesday’s Asian session. The Aussie pair rose for the third straight day.
China’s headline NBS Manufacturing PMI rose to 50.2 in February, compared with 49.9 expected and 50.1 before. The Non-Manufacturing PMI also reached 51.1, compared to the 49.9 expected and 50.1 prior.
Australia’s Current Balance for Q4 fell to 12.7B, compared with 14.9B forecasts or 23.9B before. The numbers for Home Loans and Investment Lending For Homes were mixed. In January, the former fell to 1.0% while the latter rose to 6.1%. AiG activity numbers for February were also from Australia. Both AiG (CBA) and Commonwealth Bank (CBA), both of which remained above 50, while the CBA gauge slowed.
AUD/USD showed a strong recovery Monday, as the risk-barometer pair filled the gap between week-start and multi-day highs by the end. The latest gains could be linked with the US dollar weakness and firmer gold prices. However, the market’s inflation woes and concerns about Russia and Ukraine are threatening to put pressure on the pair of buyers.
The US Dollar Index reflected the downbeat US Treasury yields in consolidating February’s gains over the past few days. The receding hawkish mood of the Fed and lower inflation expectations led to the US 10-year Treasury yields dropping the most since December 2021’s early days.
However, US inflation expectations as measured by the 10-year breakeven rate of inflation per the St. Louis Federal Reserve data don’t conform to recent easing Fed chatters. The gauge rose to its highest level since November 23 and reached a 2.62% figure at the close of Monday’s North American session. The CME’s FedWatch Tool indicated that there were nearly 5.0% chances of a Fed rate increase in March. This is compared to more than 50% just a few days ago. This is why Atlanta Fed President Raphael Bostic stated on Monday that he was in favor of a 25-bps rate increase at the March meeting.
Geopolitics is a topic that Naxar, an imagery company, recently highlighted the 40-mile distance of Russian troops from Kyiv’s capital. Negotiations between Russia and Ukraine ended Monday without any core results as was expected. Although the diplomats promised further talks this week, Moscow isn’t ready to retaliate as Russian troops bombard civilian buildings at Kyiv. Phil Stewart, a Reuters reporter, quoted President Zelenskyy as saying that he would consider establishing a no fly zone for Russian planes, missiles and helicopters. As indicated earlier by the White House (WH), the same would force the US to enter the battle. Jen Psaki, WH’s press secretary, said Monday that the US would not use its troops to establish a no fly zone over Ukraine in the wake of Russia’s invasion.
The future is bright for AUD/USD traders. They will be keeping an eye on the Reserve Bank of Australia Monetary Policy meeting. The Aussie central bank has not been hawkish despite fears of inflation. The risk-barometer pair could see further downside if the RBA reaffirms its dovish bias.
Analyse technique
Despite the recent pullback from the downward sloping resistance level from mid-November 2021 (around 0.7275 at the most), AUD/USD remains above the 100-DMA of 0.7237 for only the fourth time in four months. The Aussie pair’s future selling depends on a clear downtrend of the key DMA.
