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    IronFX Intraday Comment | GBP/USD | 03/02/2016

    • The dollar traded lower against all of its major counterparts during the European morning Wednesday, ranging from -0.76% against NZD to -0.10% vs EUR.

    • The British pound strengthened today after the UK service-sector PMI rose in January, suggesting that the British economy started the year on a stronger footing than it ended 2015, despite the global headwinds. The services index ticked up to 55.6 from 55.5 previously and beat expectations for a decline. New business increased significantly and the rate of the sector’s job growth was strong, suggesting positive news for the already tightening labor market. However the survey showed that the 12-month outlook deteriorated due to global uncertainty, concerns of a Chinese ‘hard landing’ and the possibility of a “Brexit”. Even more of a concern was that service providers reported that inflationary pressures remained historically weak, which comes on top of manufacturers signaling falls in prices for the same month. Tomorrow is another Super Thursday for the UK and we believe that signs of subdued inflationary pressures at the start of the year may force officials to serve another round of dovish remarks and perhaps downgrade their inflation forecasts for 2016 and 2017.

    • Eurozone’s final services PMI for January confirmed the preliminary estimate and showed that business activity in the bloc’s service sector rose, but at the slowest pace for a year. Average prices charged by service providers dropped, intensifying deflationary pressures. The composite PMI also showed that prices for both goods and services are falling at an accelerating rate, which magnify the likelihood for further easing by the ECB in March.

    • GBP/USD traded higher during the European morning Wednesday, breaking above the resistance (now turned into support) barrier of 1.4440 (S1) and the upper bound of the upside channel that had been containing the price action since the 21st of January. I would now expect the bulls to challenge the psychological zone of 1.4500 (R1) and if they prove strong enough to break above it, I would expect them to target the next resistance of 1.4600 (R2). Our short-term momentum indicators detect strong upside speed and amplify the case for further advances. The RSI turned up again and looks to be headed towards its 70 line, while the MACD stands above both its zero and trigger lines, pointing north. In the bigger picture, the price structure remains lower peaks and lower troughs below the 80-day exponential moving average, which is pointing down. Thus, I still see a negative longer-term picture and I would treat the recovery started on the 21st of January, or any possible extensions of it, as a corrective phase for now.

    • Support: 1.4440 (S1), 1.4320 (S2), 1.4200 (S3)

    • Resistance: 1.4500 (R1), 1.4600 (R2), 1.4650 (R3)

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