AUD/USD hangs closer to 2-1/2 month lows ahead of US ISM

The AUD/USD pair traded with bearish bias for the second straight session but has still managed to recovery around 20-pips from fresh 2-1/2 month lows touched earlier. 

Firming expectations that the Fed would raise interest rates for the third time in 2017, coupled with resumption of Trump reflation trade underpinned the US Dollar and was seen weighing on higher-yielding currencies - like the Aussie. 

Meanwhile, a modest retracement in the US Treasury bond yields, from their highest level since mid-July, helped limit deeper losses as focus shifts to the release of US ISM manufacturing PMI for September.

The key focus, however, would be on the RBA monetary policy decision, due to be announced during early Asian session on Tuesday, where no clear policy guidance should pave way for extension of the pair's near-term downward trajectory.

Apart from the RBA decision, this week's important US macro data, including the keenly watched NPF, would also play a key role in determining the pair's next leg of directional move.

Technical levels to watch

Any recovery move beyond 0.7830-35 area might continue to confront fresh supply near the 0.7850-60 region, above which the pair is likely to dart towards reclaiming the 0.7900 handle.

On the downside, sustained weakness below the 0.7800 handle is likely to accelerate the fall towards 100-day SMA support near the 0.7770-65 region en-route the 0.7700 handle.