Double Bottom

The British pound has strengthened its leadership in the G10 currency race thanks to the U.S. employment report. The increase of 209,000 jobs in June disappointed USD supporters, causing GBP/USD quotes to soar to the highest level since April 2022. However, it failed to consolidate at that level as the unemployment rate dropped to 3.6% and average wages accelerated to 4.4%, indicating that the Federal Reserve still has a lot of work ahead. The Bank of England also faces challenges. Wage growth in the United Kingdom is outpacing that of the United States. Bloomberg experts forecast a 7.1% increase in May.   The current values, along with sustained elevated inflation at 8.7%, are perceived by companies as a greater incentive for price increases than the BoE's optimistic forecasts of CPI slowdown. BoE Governor Andrew Bailey and his colleagues are determined to prevent inflation from solidifying at elevated levels, but their actions could lead to a recession. Indeed, the short-term market expects the repo rate to reach 6.5% by March 2024. Such a high borrowing cost could risk a recession. Additionally, the yield curve inversion signals an impending downturn.     At first glance, the pound is at a turning point: the projected 150 basis points increase in borrowing costs could trigger a GDP contraction. Markets generally perceive this negatively, as was the case with the U.S. dollar at the turn of 2022–2023, when its quotes were falling. However, it's important to remember that in any currency pair, there are two currencies. The current success of GBP/USD is only partially related to expectations of a repo rate increase to 6.5%.   It's also influenced by some weakening of the U.S. dollar against major global currencies. Some Forex experts believe that the most aggressive monetary restriction by the Federal Reserve in decades will eventually worsen the health of the U.S. economy. Meanwhile, Bloomberg experts predict a slowdown in U.S. consumer prices to 3.1% in June, causing the USD index to decline. The pound faces a test with the release of UK labor market data by July 14. Alongside the previously mentioned wage growth of 7.1%, Bloomberg experts forecast a slowdown in employment from +250,000 to +158,000.   According to Pantheon Macroeconomics, this change will not be sufficient to stop the Bank of England. The repo rate hike toward 6.5% will continue. Considering that markets were anticipating 5.3% a month ago, the pound's successes are logical.     In my opinion, investors have been somewhat excessive in selling the U.S. dollar based on mixed U.S. employment statistics. This vulnerability makes sterling positions vulnerable. Technically, on the daily GBP/USD chart, a reversal pattern like a Double Bottom may form, or an upward trend may resume. In the first case, we sell the pair on a breakthrough of the pivot level at 1.2785. In the second case, on the contrary, we buy it upon a new local high at 1.285.  

Australian employment increased by 64,900 in August (2,800 full-time, 62,100 part-time) Participation hits 67%, a new high Is a double bottom forming in AUDUSD? The Australian jobs data on Thursday was surprisingly good, with the number of new jobs created vastly exceeding expectations, although the bulk were in part-time roles. Participation also unexpectedly improved, hitting 67% for the first time which will be very welcomed by the central bank as it, and every other one around the world, seeks to defeat inflation while achieving a soft landing. That job will be much easier if the tightness in the labour market is eased through more people joining it, rather than people losing their jobs at higher interest rates bite. Despite these promising figures, markets are still positioning for another possible rate hike from the RBA over the coming meetings under the new leadership of Governor Michele Bullock. One more hike between now and the middle of next year is around 40% priced in which is arguably quite high under the circumstances. RBA Interest Rate Probability Source – Refinitiv Eikon   The second is the potential double bottom that’s now formed during that consolidation period. With the neckline around 0.6520, a break above here could be quite a bullish move and, in theory, offer a possible price projection based on the size of the pattern. Obviously, there are no guarantees but a break of the neckline would make things interesting.

Australian employment increased by 64,900 in August (2,800 full-time, 62,100 part-time) Participation hits 67%, a new high Is a double bottom forming in AUDUSD?   The Australian jobs data on Thursday was surprisingly good, with the number of new jobs created vastly exceeding expectations, although the bulk were in part-time roles. Participation also unexpectedly improved, hitting 67% for the first time which will be very welcomed by the central bank as it, and every other one around the world, seeks to defeat inflation while achieving a soft landing. That job will be much easier if the tightness in the labour market is eased through more people joining it, rather than people losing their jobs as higher interest rates bite. Despite these promising figures, markets are still positioning for another possible rate hike from the RBA over the coming meetings under the new leadership of Governor Michele Bullock. One more hike between now and the middle of next year is around 40% priced in which is arguably quite high under the circumstances.   RBA Interest Rate Probability Source – Refinitiv Eikon     Aussie buoyed by jobs figures The technical picture in AUDUSD is really quite interesting. On the face of it, it’s been range-bound for the last month and therefore doesn’t look particularly exciting. But two things stand out. One is the double top that formed between early June and August. The sell-off that followed was quite swift, falling around 230 pips over the following couple of weeks before the consolidation started. But with the double top itself being around 300 pips from the peak to the neckline, is there theoretically more to come? I’m sceptical considering how long it’s been trending sideways but it’s possible.   AUDUSD Daily Source – OANDA on Trading View     The second is the potential double bottom that’s now formed during that consolidation period. With the neckline around 0.6520, a break above here could be quite a bullish move and, in theory, offer a possible price projection based on the size of the pattern. Obviously, there are no guarantees but a break of the neckline would make things interesting.    

  Red lines- bullish channel yellow rectangle- double bottom support     Oil price is trading above $91 once again. Price formed a double bottom at $88 and bounced strongly upwards. Medium-term trend remains bullish as price continues forming higher highs and higher lows inside the red upward sloping channel since June. Recent price action has confirmed the importance of the $88 support level. A break below this level will be a sign of weakness and will most probably push price towards the lower channel boundary at $86 at least. Bulls remain in control of the medium-term trend and for now of the short-term trend as well.