AUD/USD hangs near 2-1/2 month lows, around 0.78 handle

The AUD/USD pair held on to its post-RBA weakness and is now trading marginally below the 0.7800 handle, the lowest since July 18.

As was widely expected, the Reserve Bank of Australia (RBA) held its cash rate steady at a record low 1.50% for the 14th month in a row. In the accompanying monetary policy statement, RBA Governor Philip Lowe maintained an upbeat tone on the state of the local economy but offered little clues over a possible rate hike move in 2018. 

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The RBA, however, warned that a stronger domestic currency would be a drag on the economy and inflation. Adding to this, Lowe's comments that the wage growth is likely to stay low and unemployment would decline only gradually, despite recent strong jobs growth, weighed heavily on the Australian Dollar. 

Tthe pair's fall to its lowest level in 2-1/2 months could also be attributed to a stronger follow through US Dollar buying interest. Against the backdrop of Monday's upbeat US ISM manufacturing PMI, surging US Treasury bond yields underpinned the greenback demand and was eventually seen driving flows away from higher-yielding currencies - like the Aussie.

In absence of any major market moving economic releases, the US bond yield dynamics would now turn out to be an exclusive driver of the pair's movement through Tuesday's trading session.

Technical levels to watch

Immediate support is pegged at 100-day SMA, near the 0.7770 region, below which the pair is likely to accelerate the fall towards 0.7685 horizontal support with some intermediate support near the 0.7725-15 region.

On the upside, 0.7825-30 zone now seems to act as immediate hurdle and is closely followed by resistance near the 0.7855-60 region. A convincing move above the mentioned barriers could assist the pair to head back towards reclaiming the 0.7900 handle.