Forex Market: AUD/USD remains firm despite deepening Ukraine crisis

AUD/USD, a liquid proxy for risk, was holding gains on Tuesday, as higher global commodity prices offset some investor concerns stemming from Russia’s incursion into eastern Ukraine.

Russia’s President Vladimir Putin has ordered troops into two breakaway regions in eastern Ukraine after recognizing their independence.

According to a Reuters report, a US official said the move could not yet be considered as a “further invasion” that would lead to the most severe sanctions against Moscow. Still, a broader campaign could be expected at any time.

Market focus now sets on a scheduled meeting between Russia’s Foreign Minister Sergei Lavrov and US Secretary of State Antony Blinken on Thursday, followed by a possible US-Russia summit on Friday.

The Russian rouble plunged to a fresh 23-month trough against the US Dollar earlier on Tuesday, with USD/RUB pair last up 0.57% on the day to trade at 80.2158.

“The sharp sell-off in Russian assets is a stark reminder that tension remains super high and risk sentiment is being hit across equity, credit and bond markets,” Westpac analysts wrote in an investor note.

“However, the commodity story remains super supportive though and we are in the middle of miner dividend season meaning that we are likely set for more rangy price action around $0.72.”

As of 9:34 GMT on Tuesday AUD/USD was edging up 0.35% to trade at 0.7215. The major Forex pair has gained 2.10% so far in February, following a 2.81% drop in January.

Bond Yield Spread

The spread between 2-year Australian and 2-year US bond yields, which reflects the flow of funds in a short term, equaled -26.45 basis points (-0.2645%) as of 9:15 GMT on Tuesday, up from -31.8 basis points on February 21st.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 0.7193
R1 – 0.7219
R2 – 0.7249
R3 – 0.7275
R4 – 0.7302

S1 – 0.7163
S2 – 0.7137
S3 – 0.7107
S4 – 0.7078