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    IronFX Intraday Comment | EUR/GBP | 05/01/2016

    • The dollar traded higher against most of its G10 counterparts during the European morning Tuesday, ranging from 0.20% against CAD to 0.67% vs SEK. The greenback was lower against JPY.

    • The UK construction PMI rose to 57.8 in December from 55.3 in the previous month, and exceeded expectations of an increase to 56.0. Following yesterday’s unexpected decline in the manufacturing PMI, the positive construction reading may alleviate some concerns that the UK economy is slowing down further in Q4. As such, the services PMI for the same month, due to be released tomorrow, is likely to better gauge whether the economy has lost steam in Q4, especially as services account for the vast majority of UK’s GDP. This could ease some of the downward pressure on GBP.

    • Eurozone’s preliminary CPI rate for December was unchanged at 0.2% yoy, missing expectations of a rise to 0.3% yoy. Following Monday’s unexpected slowdown in the German inflation rate, the market reaction today was muted as some market participants may have adjusted their forecasts downwards. Furthermore, given that the ECB eased policy further at its last meeting, the soft readings could increase the possibilities for the Bank to take further action in the foreseeable future. This could keep EUR under selling pressure.

    • EUR/GBP traded lower during the European morning Tuesday and the pair is currently testing the crossroad between the 0.7335 (S1) support and the short-term uptrend line taken from the low of the 7th December. A break below that support area is likely to turn the short-term outlook negative in my view and could initially aim for the 0.7305 (S2) line, marked by the low of the 23rd of December. Looking at our short-term oscillators, I see that the RSI fell below its 50 line and points down, while the MACD, already below its trigger line, has just obtained a negative sign. These indicators reveal negative momentum and amplify the case for further declines. Switching to the daily chart, I see that the rate has been trading within a wide sideways range between the 0.6980 support area and the resistance zone of 0.7485 (R3). As a result, although I see a near-term uptrend, I would like to hold a “wait and see” stance as far as the overall outlook of this pair is concerned.

    • Support: 0.7335 (S1), 0.7305 (S2), 0.7275 (S3)

    • Resistance: 0.7365 (R1), 0.7415 (R2), 0.7485 (R3)

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