• Australia, net energy exporter gains from higher commodity prices amidst Ukraine crisis.
• Reserve Bank of Australia (RBA) keeps its monetary policy unchanged, with OCR at 0.10%.
• Upbeat China’s PMI and Australia Upbeat retail sales data of January month favors Aussie, Ukraine development eyed.

The Australian dollar was resilient on Tuesday since strength in domestic economy and high commodity prices helped the Aussie against escalating geopolitical tensions.

Some of the demand was simply due to geography, with Australia and New Zealand distant to the troubles in Europe and little exposed to Russian trade. Australia as a net energy exporter is also set to gain from higher commodity prices, with liquefied natural gas and coal up sharply, while wheat, nickel, aluminium and iron ore were all firm.

The RBA matched wide market expectations of keeping the benchmark rate unchanged at 0.1%. Wrapping up its March policy meeting, the Reserve Bank of Australia (RBA) held rates at 0.1% and reiterated it was prepared to wait for a long-desired pick up in wages growth before acting to tighten policy.

“The Board is prepared to be patient as it monitors how the various factors affecting inflation in Australia evolve,” said RBA Governor Philip Lowe in a brief statement. “The war in Ukraine is a major new source of uncertainty.”

Lowe recently said it was plausible a first rate rise could come later this year if the economy continues to recover, while markets are pricing in a move as early as July.

Talking about data, On Monday, Australia retail sales for the month of January was upbeat at 1.  8% exceeded  the forecast of -0.3% and previous readout of -4.4%. Whereas Earlier in the day, Australia’s Current Account Balance for Q4 eased to 12.7B versus 26.56B forecasts and 23.9B prior. Further, Home Loans and Investment Lending For Homes flashed mixed numbers as the former eased to 1.0% whereas the latter rallied to 6.1% in January.

However, China’s upbeat data underpinned the AUD/USD bulls. China’s headline NBS Manufacturing PMI for February had rose to 50.2 versus 49.9 expected and 50.1 prior. Further, the Non-Manufacturing PMI crossed 51.1 previous readouts with 51.6 figures for the stated month.

On geopolitical front, Ukraine-Russia talks has ended without any update on Monday but have been kept on the table for discussion. However, Russia’s criticism of the Western sanctions and aggression of military invasion inside Kyiv suggests that the geopolitical risks have miles to go before easing, which may weigh on the market sentiment and test the AUD/USD bulls.

AUD/USD 4 Hour Chart:

Support: 0.7192 (S1), 0.7125 (S2), 0.7089 (S3).

Resistance: 0.7295 (R1), 0.7331 (R2), 0.7398 (R3).

Amidst all the catalysts favoring the Australian dollar against the American dollar, we expect a bullish trend for AUD/USD.