AUD/USD tumbles on risk aversion, tests 0.75

• The AUD/USD pair's recovery is short-lived.
• Negative market sentiment continues to weigh on risk-sensitive currencies.
• US Dollar Index holds on to daily gains, stays below 95.

Following a weak recovery attempt during the early trading hours of the NA session, the AUD/USD pair, once again, came under pressure and dropped to a fresh 8-day low at 0.7500. As of writing, the pair was trading a couple of pips above that level and was down 0.6% on the day.

As a risk-sensitive currency, the aussie is having a difficult time finding demand on Tuesday. With American traders returning from the 3-day long Memorial Day weekend, the flight-to-safety remains as the main theme of the FX markets. Despite a 4% loss in the 10-year US T-bond yields, the greenback is showing resilience against its rivals, especially the European currencies, as the political woes in Italy stays as the primary source of the risk-aversion. At the moment, the DXY is adding 0.5% on the day at 94.85 and is headed for its highest daily close in more than seven months.

The only data featured from Australia during the Asian session on Wednesday will be the April building permits, which is expected to contract by 3% on a monthly basis. However, any market reaction to this data is unlikely to have a significant impact on the pair's price action as investors will be following the market sentiment. Later in the day, the ADP private sector employment report and the Q1 GDP growth figures from the United States will be looked upon for fresh impetus.

Technical levels to consider

The pair could extend its losses with a daily close below 0.7500 (daily low/psychological level). 0.7445 (May 16 low) and 0.7410 (May 9 low) could be determined as the next short-term targets. On the flip side, the initial resistance is located at 0.7600 (psychological level/50-DMA) ahead of 0.7680 (Apr. 23 high) and 0.7730 (200-DMA).