AUD/USD dropped sharply to as low as 0.8577 last week and the break of 0.8734 support confirms that whole decline from 0.9404 has resumed. Also, initial target of 23.6% retracement of 0.6008 to 0.9404 at 0.8603 was already met. Initial bias remains on the downside this week and sustained trading below 0.8603 fibonacci level will set the stage further deeper fall towards 0.8262 medium term resistance turned support next. On the upside, though, above 0.8717 minor resistance will turn intraday bias neutral and bring consolidations. But upside should be limited by 0.8915 resistance and bring fall resumption.
In the bigger picture, the break of 0.8734 support revived the case that AUD/USD has already topped out in medium term at 0.9404, on bearish divergence condition in daily MACD. Deeper correction should now be seen towards 0.7702/0.8262 support zone, with 50% retracement of 0.6008 to 0.9404 at 0.7706. On the upside, break of 0.9327 is needed to invalidate this view. Otherwise, outlook will remain bearish and another fall is in favor even in case of strong rebound.
In the longer term picture, long term correction from 0.9849 has likely completed at 0.6008 already, after being supported slightly above 76.4% retracement of 0.4773 (01 low) to 0.9849 (08 high). Rise from 0.6008 is possibly developing into a new up trend which extend the long term rise from 0.4773. We'll continue to favor the long term bullish case as long as 0.7702 cluster support holds and expect an eventual break of 0.9849 high. However, a break of 0.7702 support will firstly argue that whole rise from 0.6008 has completed. Secondly this will open up the case that AUD/USD is in phase of a long term consolidation and will gyrate in the large range of 0.6008/0.9849 for some time.