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    IronFX Intraday Comment | EUR/GBP | 04/02/2016

    • The dollar traded lower against all of its G10 peers, as the greenback’s selloff continued during the European morning Thursday.

    • On its first “Super Thursday” of the year, the Bank of England kept its benchmark interest rate unchanged, but the vote of the MPC members was changed to a unanimous 9-0, as the previously lone dissenter Ian McCafferty dropped his vote for a rate hike. In the meeting statement, officials calmed market participants expecting the next move from the Bank to be a rate cut, but they stated that interest rates are more likely to increase over the forecast period. However, they added that when rates begin to rise, they are expected to do so more gradually and to a lower level than previous cycles. The MPC also noted that it expects CPI inflation to remain below 1% until the end of the year and that the risks to that outlook remain to the downside. In the quarterly Inflation Report, the Bank revised down its 2016 GDP forecast to 2.2% from 2.5% in November. Inflation expectations were also revised down as a result of the recent fall in commodity prices, while wage growth was downgraded, with officials quoting persistent low inflation and the increase in population as the main factors. The sterling fell on the news against its US counterpart, but recovered immediately and continued to trade even higher in the following minutes. However, given the Bank’s downward revisions and its overall dovish stance, we could see the pound giving back these gains in the foreseeable future.

    • EUR/GBP traded higher after all BoE policy members voted to keep interest rates on hold. The pair emerged above 0.7665 (S1), the upper bound of the sideways range it had been trading since the 21st of January, something that turned the short-term outlook positive in my view. If the bulls are strong enough to maintain the rate above the aforementioned level, I would expect them to target the resistance line of 0.7755 (R1), marked by the peak of the 20th of January. Our momentum studies have entered their bullish territories, supporting that the pair is likely to trade higher for a while. The RSI emerged above its 50 line and now looks able to challenge its 70 line, while the MACD, already above its trigger line, has just turned positive. Switching to the daily chart, I see that on the 8th of January, the rate managed to emerge above the upper bound of the wide sideways range the pair had been trading since the beginning of February 2015. This has turned the medium-term outlook positive. However, I would like to see a clear move above 0.7755 (R1) before getting more confident on the continuation of this upside path. Something like that would confirm a forthcoming higher high on the daily chart and could set the stage for more bullish extensions, perhaps towards the 0.7865 (R2) resistance zone.

    • Support: 0.7665 (S1), 0.7615 (S2), 0.7540 (S3)

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


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