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    IronFX Intraday Comment | GBP/JPY | 06/01/2016

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

    • The French final Markit service-sector PMI slipped into contraction territory in December, while the same figures for the Eurozone and Germany increased, beating expectations of staying unchanged. Despite the disappointment in the French figure, these readings suggest that Eurozone’s economy as a whole finished the year on a solid footing. Nevertheless, the soft inflation figures released on Tuesday may keep the door open for further stimulus in order to boost the bloc’s economy.

    • The UK service-sector PMI fell somewhat in December, which may suggest that the economy slowed in the final quarter of the year. Following the mixed results of the manufacturing and construction PMIs for the same month, the services index added to evidence that the economy is losing steam. On top of that, UK’s growth outlook is posed with significant risk in 2016, with increasing uncertainty about the global economy as well as the prospect of a “Brexit”. These downside risks magnify the likelihood for further declines in GBP in the close future.

    • GBP/JPY continued its free fall during the European morning Wednesday, falling below the support (now turned into resistance) barrier of 174.00 (R1). The short-term bias looks as negative as it can get and as a result, I would expect a clear dip below 173.00 (S1) to set the stage for more bearish extensions, perhaps towards our next support level of 171.65 (S2). Our momentum indicators reveal accelerating downside speed and confirm sellers’ aggressive mood. The RSI still stands below its 30 line and points down, while the MACD, at extreme negative levels stands below its signal line, pointing south as well. Zooming out to the daily chart, I see that on the 21st of December the rate fell below the 180.50 key hurdle, which is the lower bound of the wide range the pair had been trading since the 25th of August. Bearing that and the decisive dip below the psychological zone of 175.00 (R2), I would see a negative medium-term picture as well.

    • Support: 173.00 (S1), 171.65 (S2), 171.00 (S3)

    • Resistance: 174.00 (R1), 175.00 (R2), 176.20 (R3)

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