AUD/USD clings to daily gains, around mid-0.7900s

The AUD/USD pair trimmed some of its early strong gains and retreated around 25-30 pips from closer to 26-month tops.

A modest uptick in the US Treasury bond yields, which although failed to lend any support to the US Dollar was seen capping gains for higher-yielding currencies - like the Aussie. 

However, the prevalent positive tone around commodity space, especially copper and gold remained supportive of the strong bid tone surrounding the major. Hence, the pair's retracement from higher level could still be categorized as corrective in nature amid near-term overbought conditions.

Against the backdrop of persistent worries over the US President Donald Trump’s campaign ties with Russia, a strong follow through buying interest, helping the pair to conquer the key 0.80 psychological mark, remains a distinct possibility.

Next in focus would be the US economic docket, featuring the release of flash PMI prints and existing home sales data, which would be looked upon for some trading impetus.

The key focus, however, would remain on Wednesday's FOMC monetary policy decision, which would help determine the pair's next leg of directional move. 

Technical levels to watch

Valeria Bednarik, Chief Analyst at FXStreet writes: "In the daily chart, technical indicators are retreating within overbought territory, while the price remains far above a bullish 20 SMA, not enough to support additional declines ahead. In the 4 hours chart, however, the chances of a bearish move are higher, as the upside remains contained by a horizontal 20 SMA, currently around 0.7930, while technical indicators turned modestly lower within neutral territory. Friday's low was set at 0.7874, the level to break to confirm additional slides ahead."