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    IronFX Intraday Comment | GBP/JPY | 02/02/2016

    • The dollar traded higher against most of its major counterparts during the European morning Tuesday, ranging from 0.48% against NZD to 0.11% vs CAD. The greenback remained virtually unchanged against GBP and EUR.

    • The British pound came under renewed selling pressure today after the UK construction PMI fell to a nine month low in January, suggesting the sector started 2016 on a disappointing note. However, sterling recovered its losses within the following minutes to trade nearly unchanged against the greenback. The construction index fell to 55.0 from 57.8 previously, missing expectations of a minor decline to 57.5. Heightened economic uncertainty was the biggest drag on new orders, while the sector’s job growth saw its slowest pace in almost two and a half years. The construction results come in contrast with Monday’s better-than-expected manufacturing PMI, which raised expectations that the two sectors may have recovered from their soft Q4 prints. Nevertheless, we are not convinced that the weakness in the construction sector reflects a slow start for the whole economy in 2016. Instead we would prefer to wait until the service-sector PMI is released on Wednesday before drawing any conclusions as the sector accounts for over 70% of the UK GDP.

    • GBP/JPY traded lower during the European morning Tuesday after it hit resistance at the psychological line of 175.00 (R1). Nevertheless, the decline was stopped at the 173.00 (S1) level and then the rate rebounded somewhat. As long as the pair is trading above the short-term uptrend line taken from the low of the 21st of January, I would consider the short-term outlook to stay positive. However, I would like to see a clear move above the psychological zone of 175.00 (R1) before getting confident on further advances. Something like that would confirm a forthcoming higher high on the 4-hour chart and could initially aim for the next resistance of 176.25 (R2), marked by the peak of the 5th of January. Taking a look at our short-term oscillators though, I see signs that another setback could be on the cards. The RSI slid after it hit its 70 line, while the MACD has topped and just fell below its trigger line. As for the broader trend, although the medium-term picture still looks cautiously negative, given the prospect for further short-term recovery, I would switch my stance to flat.

    • Support: 173.00 (S1), 171.40 (S2), 170.00 (S3)

    • Resistance: 175.00 (R1), 176.25 (R2), 178.00 (R3)

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