AUD/USD drops to session lows on news of a possible Yuan devaluation

   •  News of China potentially devaluing CNY prompts some fresh selling. 
   •  An uptick in the USD demand/US bond yields adds to the downward pressure.
   •  Technically seems vulnerable if 0.7660-50 support is broken.

The AUD/USD pair once again failed near the 0.7700 handle and quickly retreated over 30-pips from session tops. 

The latest leg of sharp drop over the past hour or so could be attributed to a news report, via Bloomberg, that China studying the impact of gradual Yuan devaluation to counter the US-China trade disputes.

This coupled with a modest uptick in the US Dollar demand, backed by a goodish pickup in the US Treasury bond yields, which tends to dent demand for higher-yielding currencies - like the Aussie, further collaborated to the pair's retracement slide. 

The pair has now turned lower for the third consecutive session, with bullish commodity prices, especially copper, also doing little to lend any support to the commodity-linked Australian Dollar. Hence, a follow-through weakness, possibly on the back of some fresh technical selling below 0.7660-50 immediate support, now looks a distinct possibility.

Technical levels to watch

A clear break below the mentioned support has the potential to continue dragging the pair towards 0.7625 intermediate support en-route the 0.7600 handle. On the upside, the 0.7700 handle now seems to have emerged as an immediate strong hurdle, above which a bout of short-covering could lift the pair towards retesting the 0.7745-50 supply zone.