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    IronFX Essential Intraday Comment | 06/08/2015 EUR/GBP

    • The dollar traded unchanged or lower against its G10 peers during the European morning Thursday. It was higher against GBP, SEK, CHF, NOK and NZD, in that order, while it was virtually unchanged against AUD, CAD, JPY and EUR.

    • The British pound came under increased selling pressure as interest rate hike expectations were pushed back, given that only one BoE MPC member voted for a rate hike. This surprised the market as most observers -- including us -- were expecting the formerly hawkish member Weale to join McCafferty in voting to raise rates. As for the quarterly Inflation Report, the Bank expects inflation to pick up a bit more slowly because of the second slump in global oil prices recently, but should still go back to 2% in two years. On the other hand, GDP was revised up, adding a slightly positive tone.

    EUR/GBP surged at midday in Europe after the barrage of information from the BoE MPC meeting was released. The rate hit support at 0.6970 (S2), emerged above the round figure of 0.7000 (S1) and rallied towards the 0.7045 (R1) key resistance. Although the rate remains within the downside channel, which technically keeps the short-term trend negative, I see signs that this time we may exit this channel on the upside. The RSI raced above its 50 line and is now pointing up, while the MACD, although negative, has bottomed and crossed above its trigger line. These signs support the case that this time we may see EUR/GBP escaping from the channel. A move above 0.7045 (R1) is likely to confirm the case and perhaps open the way for the 0.7100 (R2) hurdle.

    • However, on the daily chart, the price structure still suggests a longer-term downtrend. As a result, I would treat any further upside near-term extensions as a corrective move of that down path.

    • Support: 0.7000 (S1), 0.6970 (S2), 0.6935 (S3)

    • Resistance: 0.7045 (R1), 0.7100 (R2), 0.7160 (R3)

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