GBPAUD Double Top (Sept 17, 2015)

A double top formation has materialized after price failed in its last two attempts to break above the 2.2100 major psychological resistance.

The pair is currently testing the neckline of the formation around the 2.1500 levels, with a breakdown likely to spur a selloff. The chart pattern is around 600 pips tall so the resulting downtrend could last by at least the same number of pips, taking GBPAUD down to the 2.0900 mark.

On the other hand, a bounce off the neckline support could spur another test of the resistance at the previous highs, possibly creating a triple top formation. Stronger buying pressure could lead to a break above the 2.2100 mark, signaling a continuation of the uptrend.

Data from the UK economy came in mixed, as the August jobs report showed that 1.2K jobs were lost during the month versus expectations of a 5.1K increase. Still, the unemployment rate fell from 5.6% back to the record low of 5.5% while the average earnings index indicated a faster pace of wage growth at 2.9% for the three-month period ending in July.

Prior to this, the UK CPI readings came in line with expectations, with the headline figure showing a flat reading and the core version of the report showing a decline from 1.2% to 1.0%. In Australia, the RBA minutes showed that the central bank thought that current monetary policy was appropriate but expressed concerns about the slowdown in China and the downturn in commodities.

The UK retail sales report is up for release today and this could be a catalyst for either a break or a bounce. Consumer spending is expected to tick up by 0.2% but analysts are hoping to see an upside surprise due to the steady pickup in wages for the past months. Nonetheless, a disappointing read could spur more losses for the pair and allow it to complete the double top breakdown.

By Kate Curtis from Trader's Way