AUD/USD dropped sharply to as low as 0.7797 last week. Firm break of 0.7807 support, with bearish divergence condition in daily MACD, argues that rise from 0.7382 is possibly completed. Initial bias remains on the downside for medium term fibonacci level at 0.7628 first. Decisive break there will target 0.7328 key cluster support. On the upside, break of 0.7874 minor resistance is need to indicate completion of the decline. Otherwise, outlook will now be cautiously bearish.
In the bigger picture, rise from 0.6826 medium term bottom is seen as corrective pattern. Current development suggests that it might be completed with three waves up to 0.8124 already. Break of 38.2% retracement of 0.6826 to 0.8124 at 0.7628 will firm this bearish case. And, decisive break of 0.7328 key cluster support (61.8% retracement at 0.7322) will confirm and bring retest of 0.6826 low. In case rise from 0.6826 resumes and extends, strong resistance should be seen at 38.2% retracement of 1.1079 to 0.6826 at 0.8451 to limit upside.
In the longer term picture, 0.6826 is seen as a long term bottom. Rise from there could either reverse the down trend from 1.1079, or just develop into a corrective pattern. At this point, we’re favoring the latter. And, as long as 38.2% retracement of 1.1079 to 0.6826 at 0.8451 holds, we’d anticipate another decline through 0.6826 at a later stage.
