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    IronFX Intraday Comment | EUR/GBP | 10/02/2016

    • The dollar traded mixed against its major counterparts during the European morning Wednesday. It was higher against JPY, EUR, SEK and CHF in that order, while it traded lower vs AUD, NZD, NOK, CAD and GBP.

    • The British pound weakened briefly after the UK industrial production for December fell by 1.1% mom, from -0.7% mom previously and below expectations of a 0.1% decline. The unexpected plunge in December brings the overall fall in production during Q4 to -0.5%, significantly larger than the -0.2% that the ONS calculated in the first estimate of Q4 GDP. However, due to the small weight of the production industries within the British economy, the impact of this may not be enough to revise down the preliminary Q4 GDP estimate. While the revision may be somewhat negligible, it could fuel concerns about the unbalanced nature of growth within the UK economy, as industry continues to lag behind services. After a rough second half of last year, the outlook for manufacturers may deteriorate further given the global financial turmoil and the uncertainty surrounding the in/out EU referendum. Even the recent depreciation in pound against its peers may not be enough to ease the pressure on manufacturers, as this effect needs some time to work through the economy. In this environment, the weak data are likely to push further back expectations for a rate hike by the BoE, and keep GBP under selling interest, in our view.

    • EUR/GBP traded lower yesterday after the pair hit resistance at the 0.7850 (R1) barrier. Today, during the European trading session, the pair continued its decline and is currently headed towards our 0.7730 (S1) support level. Even though the price outlook on the 4-hour chart is still positive, a break below the 0.7730 (S1) line could carry larger bearish implications and perhaps challenge our next support at 0.7665 (S2). Our short-term oscillators have both turned down and support the notion. The RSI fell below its 70 line and is now willing to cross below 50, while the MACD, although in its positive territory has crossed below its trigger line. Zooming out 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. Therefore, I would consider the medium-term outlook to be positive as well.

    • Support: 0.7730 (S1), 0.7665 (S2), 0.7600 (S3)

    • Resistance: 0.7850 (R1), 0.7920 (R2), 0.8000 (R3)


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