AUD/USD seems vulnerable near multi-day low, bears flirt with 0.7000 amid stronger USD

• AUD/USD turns lower for the second straight day and drops to a multi-day low.
• Hawkish Fed expectations continue to underpin the USD and exert pressure.
• Recession fears further benefit the USD and weigh on the risk-sensitive aussie.

The AUD/USD pair struggles to capitalize on its intraday recovery move and meets with a fresh supply near the 0.7040 region on Tuesday. Spot prices turn back lower for the second successive day and slip below the 0.7000 psychological mark, hitting a four-day low during the first half of the European session.

The US dollar catches some bids for the third straight day and climbs back closer to the monthly peak, which turns out to be a key factor exerting downward pressure on the AUD/USD pair. Despite last week's softer US CPI report, the recent hawkish comments by Fed officials suggest that the US central bank would stick to its policy tightening path. This remains supportive of elevated US Treasury bond yields and continues to offer support to the greenback.

Apart from this, growing worries about a global economic downturn tempers investors' appetite for perceived riskier assets. The anti-risk mood is evident from a generally softer tone around the equity markets, which further underpins the safe-haven buck and contributes to driving flows away from the risk-sensitive aussie. This, along with weaker commodity prices, exerts additional downward pressure on the resources-linked Australian dollar and the AUD/USD pair.

Bulls seem unimpressed by the Reserve Bank of Australia’s (RBA) August meeting minutes, showing that board members agreed it was appropriate to continue to process of normalizing monetary conditions. Furthermore, weakness below the 0.7000 mark could be seen as a fresh trigger for bearish traders and supports prospects for further losses. The fundamental/technical backdrop suggests that the path of least resistance for the AUD/USD pair is to the downside.

Market participants now look forward to the US economic docket, featuring housing market data and Industrial Production figures,  for some impetus later during the early North American session. Traders will further take cues from the US bond yields, which should influence the USD price dynamics. This, along with the broader market risk sentiment should allow traders to grab short-term opportunities around the AUD/USD pair.

Technical levels to watch