"While the medium-term uptrend for AUD/USD is intact, the current setup suggests that a corrective phase is close, given the deteriorating short-term technical backdrop. For that view, the recent struggles to extend through the next zone of critical resistance highlight the growing risk of a retracement.

In this regard, the .7700/.7850 resistance area has capped the upside for now. It includes the downtrend line from the 2013 high, the August and April highs, the 76.4% retracement from the May '15 high, as well as the 38.2% retracement from the 2014 peak. Given this strong confluence of resistance, we sense it will remain a tough hurdle to exceed. Note that this view is also consistent with the overbought and diverging momentum setup. Still, we continue to monitor key support levels for confirmation of a sustained corrective phase, given similar bearish frameworks since Q1.

In turn, the .7470/.7394 support zone, which includes the 38.2% retracement of the rally from the May low, the August low, the late July low and the 200-day moving average, represents a critical test. Violations confirm the onset of a deeper pullback into the .7300 area (76.4% retracement), if not lower.

Alternately, a break above the .7850 resistance would signal that the medium-term uptrend can extend in a more significant manner".

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