AUD/USD Advances As Geopolitical Fears Ease
Geopolitical Situation
We have seen a barrage of news around Ukraine this week and the latest development has created hopes of de-escalation, as US Secretary of State Blinken has agreed to meet his Russian counterpart Lavrov in Europe next week, provided there is no further Russian invasion of Ukraine [1].
The situation however remains tense and western officials continue to refute Russia's announcement of troop withdrawals from near Ukraine, which had then sparked another wave of optimism.
Commenting on the topic yesterday, Mr Blinken noted that "We do not see that happening on the ground" [2], while NATO Secretary General Stoltenberg said that "We are concerned that Russia is trying to stage as a pretext for an armed attack against Ukraine" [3].
Fed Commentary
Yesterday we got some comments from high profile Federal Reserve voters, who pushed for tightening.
Fed of St Louis Mr Bullard has been very vocal about his massively hawkish views and speaking on CNN, he reiterated calls for 100 basis points of rate increase by July 1. There are three Fed meetings up to that point, so this means that he wants at least one 50 basis points move on rates. [4].
His Cleveland Fed counterpart Ms Mester also pushed on the tightening front, as she considers appropriate to increase rates in March and "follow with further increases in the coming months". [5]
Despite these comments however, market pricing around the rate path has moderated, as Wednesday's minutes from the Fed's January meeting revealed a measured stance and poured cold water on aggressive expectations. [6].
At the time of writing, CME's FedWatch Tool projects a 25 basis point rate hike in the next meeting (March) with a 67.3% probability, from a 50 bps move before the minutes. Furthermore, it now projects up to six increases by the end of the year, from up to seven previously. [7].
AUD/USD – H4
The pair extends yesterday's gains and heads towards its third straight profitable week, as the risk-sensitive Aussie benefits for the current optimism around Ukraine, while the US Dollar cannot elicit support from the recent hawkish Fed commentary.
AUD/USD now looks towards mid-0.7200, although the daily Ichimoku Cloud and the descending trend-line for January's high may pose headwinds. Daily closes above it though, can allow it to push for the 200Day EMA and the year's highs (0.7305-15).
Despite today's surge, current levels have the ability to contain the Aussie and along with a potential change in market sentiment, create pressure towards the EMA200 (0.7160-70). However, the downside seems well protected, as the ascending trend-line from January lows follows a little lower and a break of both would be required to shift bias to the downside.
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.
As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.
References
| Retrieved 18 Feb 2022 https://twitter.com/StateDeptSpox/status/1494485800494542870 | |
| Retrieved 18 Feb 2022 https://www.state.gov/secretary-antony-j-blinken-on-russias-threat-to-peace-and-security-at-the-un-security-council/ | |
| Retrieved 18 Feb 2022 https://www.nato.int/cps/en/natohq/opinions_191847.htm | |
| Retrieved 18 Feb 2022 https://www.stlouisfed.org/from-the-president/video-appearances/2022/bullard-cnn-monetary-policy | |
| Retrieved 18 Feb 2022 https://www.clevelandfed.org/newsroom-and-events/speeches/sp-20220217-transitioning-monetary-policy | |
| Retrieved 18 Feb 2022 https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20220126.pdf | |
| Retrieved 19 Apr 2026 https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html# |
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