Rectifier circuit for ACS712 with 3.3V ADC
I'm using and ESP32 which has a built-in ADC with a reference voltage
  of 3.3V. Hence, the signal will be alternating from 1.5V to 3.5V which
  will then be processed by the MCU accordingly. I understand that I can
  simply use a voltage divider to step down the voltage but that will
  lose some precision.


How much precision will you lose? To reduce 3.5V to 3.3V the voltage divider must have a ratio of 3.3/3.5 = 0.943. Each bit represents a power of 2, so to lose a full bit of precision the signal amplitude would have to be reduced by 50%. But you will only lose 6%, which is much less than a single bit. 

However the ACS712-5A actually has an output voltage range of about 0.6V to 4.4V, so you should use a divider with a ratio of 0.75. This will still only reduce precision by half a bit, not enough to be worried about.