AUD Jobs Data Suspicious, GBP Subject To High Vols

Forex News and Events:

The impressive Australian employment change didn’t convince traders fully as the disproportionate full/part-time jobs ratio left unanswered questions regarding the future outlook of the Australian labor market. AUD/USD failed to hold ground above its 200-dma, while EUR/AUD pared losses despite the ongoing geopolitical risks in Ukraine, but also the contamination risk of the Scottish situation. GBP/USD traded at week highs, forming a Morning Star on our candle pattern monitor. The volatilities in GBP escalate due to high sensitivity to news/polls on Scots votes.

AUD strength: Not fully satisfactory

The Aussie-complex pares overnight gains as the jobs report has not been fully satisfactory after a closer analysis. The surprise 121’000 jobs created in August consist of a record rise of 106.7K in part-time jobs vs. 14.3K in full-time jobs. This means almost 90% of these jobs were offered part-time only. The reason of this disproportion is believed to be the change in the survey group, reported the bureau of statistics, saying that “The incoming rotation group reported a higher proportion of part-time employed persons than the rotation group it replaced, and contributed 47’000 to the increase in part-time employment” . Despite official justifications, the unusual asymmetry in this picture suggests that the improvement in the unemployment and the participation rates may remain temporary, thus the August employment figures are difficult to interpret.

After rallying to 0.9218 in Sydney, AUD/USD retraced below its 200-dma (0.9183). Trend and momentum indicators remain comfortably bearish. Offers remain solid above 0.9200/10 (optionality & Fib 50% on Nov’13 –Jan’14 drop). The critical support zone is eyed at 0.9000/0.9079 (optionality / Fib 38.2% lvl). EUR/AUD tests the 21-dma (1.41381). Yesterday’s close below 1.41500 keeps the bullish trend uncertain, while a daily close above 1.40000 should reinforce the positive sentiment, according to MACD analysis.

AUD/NZD rebounded amid the RBNZ kept its official cash rate unchanged at 3.50% and signaled further pause in policy tightening. Traders foresee one (or more) RBNZ hikes in the first half of 2015, yet the cautious policy stance pushes the short-term preference in favor of the AUD, shows the 3-month cross currency basis. Given similar UST and commo-sensitivities, the relative fundamentals in the antipodeans will define the mid-term outlook. Our longer term view still favors the Kiwi, as the RBA is expected to keep its policy rates at the current loose levels as long as the international situation allows.

GBP/USD: Morning Star formation

The daily candle patterns analysis reports the formation of a Morning Star (date: 8-10 Sep). The pattern is composed of three candle sticks (the first candle with extended negative body, the second candle with small real body and the third candle higher than the second candle’s body and retracing deeply into the first candle real body). This formation signals a short-term bullish reversal pattern. The conviction level is technically strong as the pattern appears at low price levels and the third candle retraces heavily into the first candle body.

Besides the high level of conviction of the above-described pattern, traders should be aware that the Scots vote on independence (Sep 18^th) is what drives the FX prices in the UK right now. Given the little predictability, the entire GBP-complex is highly sensitive to news/polls on Scottish referendum. The 1-month GBP/USD implied vol spiked above 10% (highest since end-2011), suggesting that the risk in GBP positions should be considered and managed accordingly (Stop Loss, strict entry/exit rules). We chose to remain in the sidelines for long-term, and /or large positions.

The Risk Today:

EURUSD EUR/USD is trying to bounce from its oversold decline. The hourly resistance at 1.2988 (05/09/2014 high) has held thus far. Another hourly resistance can be found at 1.3110 (02/09/2014 low). An hourly support lies at 1.2860. In the longer term,EUR/USD is in a succession of lower highs and lower lows since May 2014. The break of the key support at 1.3105 (06/09/2013 low) opens the way for a decline towards the strong support area between 1.2755 (09/07/2013 low) and 1.2662 (13/11/2012 low). A key resistance lies at 1.3221 (28/08/2014 high).

GBPUSD GBP/USD is trying to bounce from its oversold decline. Monitor the test of the hourly resistance at 1.6233 (08/09/2014 high). Another hourly resistance can be found at 1.6340 (05/09/2014 high), while a key resistance stands at 1.6497 (03/09/2014 high). An hourly support lies at 1.6060. In the longer term, prices have collapsed after having reached 4-year highs. The breach of the key support at 1.6220 confirms persistent selling pressures and opens the way for further decline towards the strong support at 1.5855 (12/11/2013 low). A key resistance now stands at 1.6644.

USDJPY USD/JPY continues to rise after the break of the strong resistance at 105.44 (see also the 61.8% retracement and the long-term declining trendline). Hourly supports can be found at 106.04 and 105.71 (05/09/2014 high). A long-term bullish bias is favoured as long as the key support 100.76 (04/02/2014 low) holds. The break to the upside out of the consolidation phase between 100.76 (04/02/2014 low) and 103.02 favours a resumption of the underlying bullish trend. A test of the major resistance at 110.66 (15/08/2008 high) is favoured.

USDCHF USD/CHF made new highs yesterday and is now challenging the resistance at 0.9404 (61.8% retracement). Hourly supports can now be found at 0.9315 (09/09/2014 low) and 0.9287 (05/09/2014 low). A key resistance stands at 0.9456. From a longer term perspective, the technical structure calls for the end of the large corrective phase that started in July 2012. The break of the strong resistance at 0.9250 (07/11/2013 high) opens the way for a move towards the next strong resistance at 0.9456 (06/09/2013 high). A key support now lies at 0.9104 (22/08/2014 low).