AUD/USD tumbles to 3-week lows, below mid-0.7900s

The AUD/USD pair remained heavily offered through mid-European session and tumbled to fresh session lows, around 0.7940 level. 

A combination of negative factors was seen collaborating to the pair's post-FOMC rejection slide from the 0.8100 handle. Today's comments by the RBA Governor Philip Lowe, hinting that the central bank could be far from considering any monetary policy tightening triggered initial leg of drop below the key 0.80 psychological mark. 

Meanwhile, the latest leg of sharp fall over the past hour or so could be attributed to the latest Chinese ratings downgrade. The US-based global ratings agency, Standard and Poor’s (S&P) cut China’s sovereign credit rating, for the first time since 1999, to A+ from AA- and further dampened sentiment surrounding the China-proxy Australian Dollar. 

   •  S&P on China: Prolonged period of strong credit growth has increased eco & financial risks

This coupled with weaker sentiment around commodity prices, especially copper, was also seen undermining the commodity-linked currency and contributed to the fall back closer to monthly lows. 

The pair has dropped to 50-day SMA for the first time since early June and against the backdrop of Wednesday's hawkish Fed outlook, the pair seems vulnerable to extend its downward trajectory.

On the economic data front, the release of usual weekly jobless claims and Philly Fed manufacturing index would now be looked upon for some fresh impetus.

Technical levels to watch

A follow through selling pressure below 0.7920 level has the potential to continue dragging the pair even below the 0.7900 handle towards its next major support near 0.7870 horizontal level. 

On the upside, any recovery attempts beyond 0.7960-65 zone might now confront fresh supply near the 0.80 handle, above which a bout of short-covering could lift the pair back towards 0.8030 area.