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    IronFX Intraday Comment | EUR/GBP | 21/01/2016

    • The dollar traded mixed against its G10 peers during the European morning Thursday, in the absence of any major market moving events. It was higher against NOK, NZD, and CHF in that order, while it was lower vs AUD and CAD. The greenback was virtually unchanged against EUR, JPY, GBP and SEK.

    • With no major events by the time of writing, investors eyes are on the ECB monetary policy meeting and President Draghi’s press conference following the rate decision later in the day. The Bank is expected to keep its powder dry, but to maintain its willingness to act should the risks over the outlook of inflation deteriorate further. Therefore, the highlight is likely to be the press conference by ECB Draghi. We believe that market participants will look for any hints on further policy action this year as well as on any information of how the global market turmoil and China’s slowdown may have affected Eurozone. The market is already pricing in some further easing this year, despite Draghi describing the latest measures as “adequate”. A change to that language is needed to signal additional measures and weaken the common currency.

    • Among the EM currencies, the Russian ruble hit an all-time low against the dollar today as the global oil glut continues to put downward pressure on the currencies of major oil-producing economies. USD/RUB emerged above the psychological zone of 80.00 yesterday and today, it gapped higher to trade above 84.00. On Wednesday, the Russian central bank stated that it has no immediate plan to intervene to prop up the currency as it does not pose a risk to the country’s financial system. Therefore, given that oil prices have not shown any signs of bottoming yet, there is still the risk of further weakening in the ruble and perhaps new all-time highs in USD/RUB.

    • EUR/GBP somewhat higher during the European morning Thursday, after it hit support near the 0.7655 (S1) support line. Since the rate is trading above the short-term uptrend line drawn from the low of the 6th of January, I would consider the near-term outlook to be positive. Nevertheless, I would like to see a clear close above the 0.7755 (R1) resistance zone before I get more confident on the continuation of that upside path. Something like that would confirm a forthcoming higher high and could open the way for our next resistance zone of 0.7865 (R1). Taking a look at our short-term oscillators, I see evidence that further setback could be on the cards before the bulls decide to pull the trigger again. The RSI edged down after it hit resistance near its 70 line, while the MACD, although positive, has topped and fallen below its trigger line. There is also negative divergence between the RSI and the price action. Switching to the daily chart, I see that on the 8th of January, the rate managed to emerge above 0.7485, which is the upper bound of the sideways range the pair had been trading since the beginning of February 2015. This has turned the medium-term outlook positive as well.

    • Support: 0.7655 (S1), 0.7585 (S2), 0.7520 (S3)

    • Resistance: 0.7755 (R1), 0.7865 (R2), 0.8000 (R3)


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