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IronFX Intraday Comment | EUR/GBP | 12/01/2016

• The dollar was higher against most of its G10 counterparts during the European morning Tuesday. It was lower against NOK and AUD in that order, while it remained virtually unchanged against CAD and SEK.

• The British pound came under renewed selling pressure after the UK industrial production surprised sharply on the downside. Industrial production fell 0.7% mom in November from a downwardly revised 0.0% mom previously, against market expectations of another flat reading. The unexpected fall in November and the stagnation in October raise concerns about the pace of growth towards the end of the year. With just two days ahead of the Bank of England policy meeting, these weak data combined with “Brexit” fears, are likely to dampen any expectations of a rate hike in 2016. GBP/USD fell to its lowest level since June 2010, breaking below the psychological 1.4500 support level. Given the negative sentiment towards the pound and bearing the absence of any bullish trend reversal signals, the bears could prove strong enough and push the rate towards our next support at 1.4400.

• EUR/GBP traded higher during the European morning Tuesday, breaking back above the 0.7485 (S1) obstacle. As long as the rate is trading above the uptrend line taken from the low of the 7th of December, I would consider the short-term outlook to be positive and I would expect buyers to aim for another test at the 0.7555 (R1) line in the near future. If they appear strong enough to overcome that resistance zone, I would expect them to initially aim for the next obstacle of 0.7600 (R2). Our short-term oscillators reveal upside momentum and amplify the case for EUR/GBP to continue higher, at least in the short run. The RSI rebounded from slightly above its 50 line and is now pointing up, while the MACD, already positive, shows signs of bottoming and could cross above its trigger line soon. Switching to the daily chart, I see that on Friday, the rate managed to emerge above the upper bound of the sideways range the pair had been trading since the beginning of February 2015. In my opinion, this has turned the medium-term outlook somewhat positive as well.

• Support: 0.7485 (S1), 0.7430 (S2), 0.7390 (S3)

• Resistance: 0.7555 (R1), 0.7600 (R2), 0.7690 (R3)

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