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IronFX Essential Intraday Comment | 24/08/2015 EUR/GBP

• The dollar traded unchanged or lower against its G10 counterparts during the European morning Monday, ranging from -0.14% against EUR to -0.44% vs SEK. The greenback was virtually unchanged against CHF, CAD and NZD.

• Chinese stock markets plunged more than 8% on Monday, primarily due to the disappointment that the government did not announced any support measures over the weekend. The fall in Asian markets was rolled into the European equity market, with DAX trading 2.5% lower at midday in Europe. The price action in global markets, consisting of falling yields and declining stocks accompanying the USD setback against the G10 peers, appears consistent with expectations of Fed delaying rate hike. A strong policy action from China through monetary easing or fiscal stimulus is needed to help dampen global growth concerns and for the markets to stabilize. We also need strong US data along with positive comments by Fed officials for the USD to regain its lost glamour.

EUR/GBP continued its surge and today during the European morning, it hit resistance at 0.7335 (R1). Subsequently, the rate retreated to settle slightly above the support of 0.7290 (S1). The short-term bias remains positive and therefore, I would expect the bulls to eventually take control again and aim for another test at the 0.7335 (R1) hurdle. A break above that resistance is likely to pave the way for the next obstacle at 0.7365 (R2), defined by the peak of the 10th of June. Taking a look at our oscillators though, I see the possibility for further retreat before the next positive leg. The RSI stands well above its 70 line but it has turned somewhat down, while the MACD shows signs of topping. A break below 0.7290 (S1) is likely to confirm further pullback, which could stop at 0.7250 (S2). As for the broader trend, the move above 0.7170 signaled a forthcoming higher high on the daily chart and turned the medium-term outlook positive as well.

• Support: 0.7290 (S1), 0.7250 (S2), 0.7225 (S3)

• Resistance: 0.7335 (R1), 0.7365 (R2), 0.7390 (R3)

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