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IronFX Intraday Comment | EUR/GBP | 01/12/2015

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

• Eurozone’s final manufacturing PMI for November confirmed the improvement from October, but the pace of growth was still relatively soft. Even though the French figure fell below expectations, the German PMI showed strong signs of recovery towards the final quarter of the year. On top of that, both the German and the Eurozone unemployment rates continued to decline, beating market expectations of unchanged readings. EUR/USD gained a bit on the news but the advance stayed limited below our 1.0630 resistance level. Ahead of the much-anticipated ECB policy meeting and the high expectations of further easing, the pair trades in tight ranges reflecting the restrained mood of investors before the event.

• The British pound weakened a bit after the UK manufacturing PMI declined more than expected in November, but recovered its losses in the following hour to trade unchanged against the greenback. The manufacturing PMI declined to 52.7 from 55.2 previously, below consensus of a decline to 53.6. Even though the figure remains above the 50-level that signals expansion, the decline could add to concerns of a slowdown in growth momentum. As a result, we would expect the construction PMI to be released tomorrow to better gauge whether the economy is losing steam in Q4 and add to evidence that the two sectors have not fully recovered going into Q4. This could put the GBP under renewed selling pressure.

• EUR/GBP traded marginally higher during the European morning Tuesday after finding support fractionally above the psychological line of 0.7000 (S1). As long as the rate remains between that line and the resistance of 0.7050 (R1), I would consider the intraday bias to stay neutral for now. Our short-term oscillators support my view to stay neutral for now at least as far as the near-term picture is concerned. The RSI oscillates around its 50 line, while the MACD gyrates above and below its zero line. Switching to the daily chart, I see that the dip below the 0.7200 area on the 28th of October has confirmed the negative divergence between the daily oscillators and the price action, and has also turned the medium-term picture back to the downside. Therefore, I would treat the moderate recovery started on the 18th of November from near 0.6980 (S2) as a corrective move for now. A clear close below 0.6980 (S2) would confirm a forthcoming lower low on the daily chart and could reinforce that medium-term downtrend.

• Support: 0.7000 (S1), 0.6980 (S2), 0.6950 (S3)

• Resistance: 0.7050 (R1), 0.7080 (R2), 0.7110 (R3)

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