AUD/USD drops to 2-week lows, fast-approaching 0.7100 mark

   •  A modest USD uptick keeps exerting some downward pressure for the fourth straight session.
   •  The downfall seemed rather unaffected by bullish commodity prices/US-China trade optimism.
   •  The focus shifts to Wednesday’s quarterly Aussie CPI figures and this week’s US macro data.

The AUD/USD pair dropped to near two-week lows during the early European session on Tuesday and might now be headed towards challenging the 0.7100 handle.

The pair extended last week's retracement slide from multi-week tops, levels just above the 0.7200 handle, and traded with a negative bias for the fourth consecutive session. Speculations that China might halt its stimulus measures partly offset growing optimism over a possible US-China trade deal and turned out to be one of the key factors weighing on the China-proxy Australian Dollar.

Traders even shrugged off bullish sentiment around commodity space, with bearish taking cues from a slight deterioration in risk sentiment. A mildly weaker tone surrounding equity markets was seen underpinning the US Dollar's relative safe-haven status against perceived riskier currencies - including the Aussie, and further collaborated to the pair's ongoing downfall.

Today's slide could further be attributed to some follow-through technical selling below 100-day SMA and hence, a follow-through weakness, back towards challenging the 0.7070-65 horizontal support, now looks a distinct possibility amid relatively thin US economic docket - featuring the release of new home sales data and Richmond Fed Manufacturing Index.

The key focus, however, will be on Wednesday's quarterly release of Aussie CPI figures, which coupled with important US macro data - including the advance GDP report on Friday, will play an important role in determining the pair's next leg of a directional move.

Technical levels to watch