RBA Holds; AUD/NZD Stalls; Key Jobs Data to Shake it Up

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RBA Holds; AUD/NZD Stalls; Key Jobs Data to Shake it Up

The Reserve Bank of Australia held the Official Cash Rate (OCR) at 2.50%. Glenn Stevens noted that despite some improvements in the labor market, there is likely “some time yet before unemployment declines consistently”. This is a signal that the bank will keep rates low for a long period of time. “On present indications, the most prudent course is likely to be a period of stability in interest rates.” (RBA Press Release)

The AUD/NZD was consolidating before the central bank event risk. In the 4H chart you can see a small range between 1.0924 and 1.0964 form since last Thursday. This followed a rally from 1.0622 to 1.1047 and a retreat thereafter. The overall “trend” appears to be bullish in the 4H chart.

AUD/NZD 4H Chart 8/5
audnzd 4h chart 8/5

(click to enlarge)

On the daily chart, can see that the 1.1047 level was a fresh high on the year. However, this bullish “trend” we saw developing in the 4H chart was just a bullish swing within what looks like a long consolidation channel. Or you can see it is sideways and slightly bullish, but looks to be a corrective structure compared to the bearish price action in 2013.

If price falls below 1.0920, it is likely to stay within this consolidation channel and at least reverse back toward the cluster of moving averages which is in the 1.0825-50 area.

If price pushes above 1.0964, the bullish outlook is going to be first limited to 1.1047 high on the year. However, it price action surges, it can change the structure of 2014’s price action and we can THEN consider a bullish outlook.

The structure can also change if price dips but holds above the cluster of moving averages instead of retreating back to the consolidation channel support. Another of bullish development could be the daily RSI holding above 40.

AUD/NZD Daily Chart 8/5
aud/nzd daily chart 8/5

(click to enlarge)

Jobs Data:

At beginning of the next session (8/6), Statistics New Zealand will release its employment change data for the second quarter. Economists expect around a 0.7% growth, while would be slightly lower than the 0.9% in Q1.The unemployment rate is expected to edge lower to 5.8% from 6.0%

In the following session (8/7), the Australian Bureau of Statistics will be releasing employment change data for July, which economists expect a reading of 13.5K. June added 15.9K jobs.

I think if the jobs data from both sides are in-line with expectations AUD/NZD has a slightly bearish bias because it has just come off the consolidation structure’s resistance and has more room to fall than rally within this structure. The unemployment rate is expected to hold at 6.0%

aus employment change

(source: forexfactory.com)

It will likely require a very strong AUS employment change reading ie. 25K, to move the AUD/NZD out of the channel to show a change of structure. Most likely, it will take a few months of positive data around 20K or better to give the Aussie its groove back.

To contact the reporter of this story, email Fan Yang at fan@forexminute.com
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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.