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IronFX Intraday Comment | EUR/GBP | 08/12/2015

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

• The UK industrial production for October grew by 0.1% mom, in line with expectations, and a turnaround from September’s 0.2% decline. Although the overall figure was positive, manufacturing output, a subcomponent of the industrial output, experienced an unexpected slump of 0.4% mom. This is a blow to the positive expectations regarding a rebound in the UK’s manufacturing sector, which has now contracted in all three quarters of 2015 thus far. The data confirm that the industrial sector is struggling to catch up with services, mainly due to a global slowdown in trade, led by the sluggish Chinese growth and a relatively strong pound hindering the competitiveness of British firms.

• Eurozone’s final GDP for Q3 came in line with expectations, confirming that the bloc’s economy grew at a mere 0.3% qoq. Higher household and government spending, as well as an increase in inventories, were the main subcomponents behind this minor growth. In contrast, foreign trade was the basic obstacle to higher growth, as imports rose significantly more than exports. This is a slowdown in Eurozone’s growth from the previous 0.4% qoq, while the figure has not exceeded the 0.5% rate in at least four years.

• EUR/GBP traded higher during the European morning Tuesday and is currently headed towards the key resistance zone of 0.7250 (R1), defined by the peaks of the 28th of October and the 3rd of December. Yesterday, the pair rebounded from 0.7165 (S1), printing a higher low and keeping the short-term picture positive in my view. A clear break above 0.7250 (R1) is likely to confirm a forthcoming higher high on the 4-hour chart and is likely to open the way for the 0.7300 (R2) area, marked by the inside swing lows of the 25th of September and the 19th of October. Our near-term momentum studies support somewhat my view. The RSI rebounded and now lies near its 70 line, while the MACD, already positive, shows signs of bottoming and that it could move above its trigger line soon. Switching to the daily chart, I see that Thursday’s recovery following the ECB decision brought the rate above the 0.7200 zone. What is more, our daily oscillators have entered their bullish territories. These technical signs add to my view that EUR/GBP is poised to trade higher, at least in the short run.

• Support: 0.7165 (S1), 0.7110 (S2), 0.7050 (S3)

• Resistance: 0.7250 (R1), 0.7300 (R2), 0.7360 (R3)

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