Aussie active ahead of RBA meeting

The Australian dollar started the trading week with considerable losses but has recovered and is unchanged on the day.

Volatility continues due to Ukraine crisis

The financial markets remain focused on Ukraine, where the Russian invasion continues and the capital Kyiv is bracing for a Russian onslaught at any time. Russian and Ukrainian officials are currently meeting on the Belarus-Ukraine border to discuss a cease-fire, although expectations for a breakthrough are low. Still, if there are any positive developments from the meeting, it would boost risk sentiment which would be bullish for the Australian dollar. In the meantime, the greenback remains strong, as jittery investors have snapped up the safe-haven dollar. The dollar index has pared some of today’s gains, and is currently at 96.83, up 0.23%.

The Ukraine crisis has led to significant volatility in the market, which has increased after the US and Western Europe imposed stronger sanctions against Moscow on the weekend. The EU is financing and delivering weapons to Ukraine, which is the first time the bloc is shipping weapons to a county at war. No less important, the West has also cut off some Russian banks from SWIFT, the global fund transfer system, although it has not targeted transfers related to energy. Russia is already feeling the sanctions bite, as the ruble has fallen sharply and the Russian central bank responded by raising interest rates from 9.5% to 20% to boost the Russian currency. We’re likely to see more volatility during the week, as events in Ukraine continue to unfold.

The RBA holds a policy meeting on Tuesday. The central bank is expected to maintain rates at a record low 0.10%, but the tone of the rate statement could trigger a reaction from the markets. Inflation has risen to the bank’s target band of 2-3%, but the RBA has insisted that wage growth must accelerate to 3% before conditions are ripe for a rate hike. If the statement indicates that the RBA has become more hawkish, the Aussie could rise as a result. Conversely, a negative assessment about the economy would dampen rate hike expectations and the Aussie would likely lose ground.

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AUD/USD Technical

• There is resistance at 0.7313 and 0.7393
• AUD/USD has support at 0.7124 and 0.7015

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