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    IronFX Intraday Comment | GBP/JPY | 03/11/2015

    • The dollar traded higher against almost all of its G10 peers during the European morning Tuesday. It was higher against EUR, NZD, GBP, AUD, CAD and NOK, while it was virtually unchanged against JPY, CHF and SEK.

    • The UK construction PMI declined a bit in October, but still showed a solid growth. The construction PMI came 58.8 down from 59.9 in September, in line with market expectations. Following an unexpectedly strong manufacturing PMI on Monday, further expansion in the sector shows signs that the economy has started to recover in Q4 after slowing in Q3. The focus now turns to the service-sector PMI to be released tomorrow for additional signs that the economy is picking up. Ahead of the Bank of England meeting and the quarterly inflation report, the strong data could encourage officials to keep unchanged, or at least to not revise down as much as estimated, their near-term GDP growth and CPI forecasts. In this event, GBP could remain well supported.

    • GBP/JPY traded lower yesterday after it found resistance at the upper bound of a possible rising wedge formation, near the 187.00 (R1) resistance line. Today, the rate traded in a quiet mode staying between that resistance and the support of 185.55 (S1). Our short-term oscillators give evidence that the rate is likely to trade lower in the short run, perhaps for another test at the 185.55 (S1) line. The RSI turned down after it hit its downside resistance line, while the MACD, although positive, has topped and looks ready to fall below its trigger line. There is also negative divergence between both the indicators and the price action. A clear move below the 185.55 (S1) line is likely to open the way for the lower boundary of the wedge or the next support at 184.65 (S2). As for the broader trend, the completion of a double top formation on the 24th of August has turned the medium-term outlook somewhat negative. However, the fact that the rate printed a higher low on the 2nd of October is the reason I would maintain my flat stance for now as far as the longer-term picture is concerned.

    • Support: 185.55 (S1), 184.65 (S2), 183.80 (S3)

    • Resistance: 187.00 (R1), 188.30 (R2), 189.35 (R3)

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