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IronFX Essential Intraday Comment | 17/06/2015

• The dollar traded mixed against its major peers during the European morning Wednesday, ahead of the FOMC meeting later in the day. It was higher against AUD, NZD, JPY and CAD, in that order, while it was lower against GBP and CHF. The greenback was virtually unchanged against SEK and EUR.

• The British pound gained the most after the country’s wage growth accelerated more than expected, a sign of an improvement in the labor market. The average weekly earnings rose 2.7% yoy in April from 2.3% yoy previously, above expectations of 2.1% yoy. The unemployment rate stayed at 5.5%, in line with market consensus. At the same time, the minutes of the Bank of England’s latest policy meeting showed that the committee was unanimous to leave the rates unchanged, while for two members, the decision was “finely balanced” between voting to hold or raise rates. Furthermore, the committee saw the strength of the headwinds to UK growth had begun to ease. As they ease, the interest rate is likely to rise to keep the economy to operate at normal levels. The strong employment report, along with the optimistic tone in the minutes, is likely to keep GBP supported.

• EUR/GBP tumbled during the European morning Wednesday following the strong UK employment report. Last Thursday, the pair fell below the support (turned into resistance) barrier of 0.7265 (R2) and completed a double top formation on the 4-hour chart. Since then, the price structure has been lower peaks and lower troughs and therefore I believe that the short-term picture remains negative. I believe that the rate is now headed towards the 0.7145 (S1) hurdle, where a clear dip could target the next support at 0.7115 (S2). Our short-term oscillators detect strong downside momentum and amplify the case that further declines could be on the cards. The RSI slid towards its 30 line and could fall below it soon, while the MACD stands below both its zero and signal lines, pointing down. On the daily chart, the pair has been trading in a non-trending mode since mid-March. Therefore, although we may see some further declines in the short run, I would consider the overall outlook to be neutral.

• Support: 0.7145 (S1), 0.7115 (S2), 0.7060 (S3)

• Resistance: 0.7200 (R1) 0.7265 (R2), 0.7315 (R3)

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