AUD/USD drops to one-week lows, approaches 0.7500 mark

The AUD/USD pair dropped to one-week lows during the mid-European session, with bears now eyeing a move towards challenging the key 0.7500 psychological mark.

The pair extended the previous day's rejection slide from the 0.7600 mark and witnessed some follow-through selling for the second consecutive session on Tuesday. The Australian dollar is turning out to be one of the worst-performing major currencies amid concerns over renewed COVID-19 lockdowns across parts of the country.

Perth, the capital of Western Australia, began a four-day lockdown starting Tuesday, joining Sydney and Darwin. Queensland will impose a snap three-day lockdown in capital Brisbane and some neighbouring regions from Tuesday evening. Summing it all, more than 20 million Australians, around 80% of the population, are living under restrictions.

Meanwhile, fears over the spread of the highly infectious Delta variant of the coronavirus weighed on investors' sentiment. This was seen as another factor that drove flows away from the perceived riskier aussie. Apart from this, a broad-based US dollar strength exerted some additional pressure on the AUD/USD pair and contributed to the decline.

The USD was supported by speculations that the Fed will tighten its monetary policy earlier if price pressures continue to intensify. This, along with a goodish pickup in the US Treasury bond yields, further acted as a tailwind for the safe-haven greenback and dragged the AUD/USD pair further below the 0.7545-40 horizontal support.

Market participants now look forward to the US economic docket, highlighting the release of the Conference Board's Consumer Confidence Index. Traders might further take cues from the US bond yields and the broader market risk sentiment. This might influence the USD price dynamics and produce some trading opportunities around the AUD/USD pair.

Technical levels to watch