AUD/USD tumbles to lows as USD strength intensifies

• Erases upbeat Aussie data-led gains on resurgent USD demand.
• Surging US bond yields adds to the downward pressure.

The AUD/USD reversed upbeat Australian data-led early gains and dropped to a three-day low level of 0.7816 in the past hour.

Investors looked past an unexpected jump in the Australian building approvals data, with a fresh wave of US Dollar buying interest prompting fresh supply ahead of last week's 2-1/2 month tops.

Firming market expectations that the Fed would stick to its plan and continue with is gradual monetary policy tightening cycle through 2018 remained supportive of the post-NFP strong USD recovery move.

Moreover, the latest leg of an upsurge in the US Treasury bond yields, with the 10-year yields spiking above 2.50% for the first time since the tax reform bill was confirmed in December 2017, was further seen weighing on higher-yielding currencies - like the Aussie.

Meanwhile, the prevalent positive trading sentiment around commodity space did little to revive demand for the commodity-linked Australian Dollar, albeit might help limiting deeper losses at least for the time being.

Today's relatively lighter US economic docket, highlighting the release of JOLTS job opening data is unlikely to provide any meaningful impetus ahead of the Chinese inflation figures, due for release during the Asian session on Wednesday.

Technical levels to watch

A follow-through selling pressure has the potential to drag the pair below the 0.7800 handle towards retesting 100-day SMA support near the 0.7780-75 region. On the upside, 0.7860-665 zone now seems to have emerged as an immediate strong hurdle, above which the pair is likely to dart towards reclaiming the 0.7900 handle.

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