GBPAUD could be in for a long-term reversal, as a head and shoulders pattern has formed on its 4-hour forex chart.

Price is on its way to test the neckline support at the 2.1200 area, with a downside break likely to confirm that a selloff is in order.

The chart formation is approximately 500 pips in height so the resulting breakdown could be of the same size, potentially taking GBPAUD down to the 2.0700 handle or much lower. Stochastic is on the move down, which means that sellers are in control of price action. 

RSI is also heading down, but it’s already closing in on the oversold region, which suggests that selling pressure might fade soon. The 100 SMA is still above the longer-term 200 SMA so a bounce off the nearby support areas might be possible.

Earlier today, Australia printed a stronger than expected jobs report, adding a whopping 58.6K jobs in October versus the consensus of a 14.8K gain. To top it off, the previous report was upgraded to show a smaller decline in hiring of 0.8K from the initially reported 5.1K decline. This was enough to bring the unemployment rate all the way down from 6.2% to 5.9%.

In contrast, headline jobs figures from the UK came short of expectations, as the claimant count increased by 3.3K instead of the estimated 1.6K rise. The average earnings index was unchanged at 3.0% instead of showing the projected 3.2% increase, but the unemployment rate dipped from 5.5% to 5.4%.

There are no other reports due from both the UK and Australia for the rest of the week, which suggests that this difference in employment data might keep driving GBPAUD price action. Prior to this, the rate statements from both economies indicated a shift in stance, with the BOE sounding less hawkish and the RBA appearing not too dovish.

By Kate Curtis from Trader’s Way