For the third straight session, the AUD/USD pair failed to breakthrough 0.8030-40 supply zone and witnessed a sharp retracement of around 60-pips from session tops.
Escalating risk of a 'trade war' between the US and China, following a tariff announcement from the US, was eventually seen weighing heavily on the China-proxy Australian Dollar since the Asian session on Tuesday.
Adding to this, a modest US Dollar rebound, supported by the US Senate vote to advance a three-week funding bill to reopen the federal government, further collaborated to an intense selling pressure around the major.
Meanwhile, a subdued action around copper prices and a modest pullback in the US Treasury bond yields did little to lend any support to the commodity-linked/higher-yielding currency and stall the pair's sharp slide to the 0.7970 region.
In absence of any major market moving economic releases, the pair remains at the mercy of USD price dynamics, with a follow-through retracement, led by some additional long-unwinding trade, now looking a distinct possibility.
Technical levels to watch
A follow-through retracement below 0.7960 level, leading to a subsequent weakness towards 0.7640-35 strong horizontal support, might now drag the pair back towards the 0.7900 handle.
On the flip side, any attempted up-move now seems to confront fresh supply near the 0.8000 handle and subsequent appreciating move might continue to be capped at the 0.8030-40 supply zone.
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