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    IronFX Intraday Comment | EUR/GBP | 28/01/2016

    • The dollar traded lower against most of its major counterparts during the European morning Thursday, ranging from -0.67% against AUD to -0.26% vs CHF. The greenback traded higher vs JPY, while it remained virtually unchanged against SEK.

    • The British pound gained today after the first estimate of the UK GDP for Q4 showed that the economy grew 0.5% qoq, from 0.4% qoq previously. The slight pick-up in the growth rate was primarily driven by the service sector, while industrial production and construction output both fell. Consumer demand remained supported despite the mixed retail sales data through the quarter, as rising real wages and falling unemployment fed their way into increased spending. Nevertheless, the slight acceleration in growth is unlikely to impress BoE officials, with Governor Carney stating last week that he would like to see above-average growth and rising wages before starting normalization. Bearing in mind that the first estimate is compiled via the output approach, we would like to see data from the expenditure side before drawing any safe conclusions about the UK’s performance in Q4. Under normal circumstances, an upside revision in the second estimate is likely to bring forward expectations for a BoE rate hike. However, we still believe that the uncertainty over the EU in/out referendum is the main obstacle for the BoE. We maintain our view that the Bank will refrain from acting until there is greater clarity on the referendum outcome. For now, we expect this uncertainty to continue adding pressure on the pound.

    • EUR/GBP traded lower during the European morning Thursday after it hit resistance once again at the 0.7665 (R1) line. Given that the rate has been oscillating between that resistance and the support of 0.7540 (S1) since the 21st of January, I would consider the short-term outlook to be flat. For now I see the possibility for the pair to continue its retreat and perhaps challenge the lower bound of the aforementioned range. Our short-term oscillators support the notion as well. The RSI turned down and just crossed below its 50 line, while the MACD has topped marginally above zero and appears ready to turn negative again. Switching to the daily chart, I see that on the 8th of January, the rate managed to emerge above 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 and as a result, I would treat any possible near-term downside extensions as a corrective phase for now.

    • Support: 0.7540 (S1), 0.7465 (S2), 0.7400 (S3)

    • Resistance: 0.7665 (R1), 0.7755 (R2), 0.7865 (R3)

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