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    IronFX Intraday Comment | EUR/GBP | 12/02/2016

    • The dollar traded lower or unchanged against most of its major counterparts during the European morning Friday. The greenback traded lower vs GBP, SEK and JPY in that order, while it remained virtually unchanged against EUR, CAD, NOK, NZD, and AUD. It was higher only against CHF.

    • Germany’s preliminary GDP data for Q4 showed that Eurozone’s biggest economy expanded by 0.3% qoq, the same pace as in the previous quarter and in line with expectations. The main positive contributor was domestic demand, while public spending was notably higher as well. On the other hand, net trade weighed on economic growth as exports slowed more than imports as a result of the decrease in global demand.

    • Eurozone’s preliminary GDP showed that the bloc’s economy also grew by 0.3% qoq in Q4, the same pace as previously, matching expectations. At the same time, industrial production fell unexpectedly in December. The modest growth data are unlikely to reverse the strong easing bias communicated by the ECB at its latest policy meeting, as the continued turmoil in financial markets poses significant downside risks to Eurozone’s growth and inflation prospects. The likelihood for further easing in March is high, but we would prefer to wait for the January meeting minutes, released next Friday, to get more clues on what are the most preferable tools in such case.

    • EUR/GBP traded lower during the European morning Friday, breaking below the support (now turned into resistance) barrier of 0.7780 (R1). Even though the price structure on the 4-hour chart still suggests a short-term uptrend, I see signs that the current setback may continue. The rate is now headed towards the support line of 0.7715 (S1), where a clear dip is likely to initially target the key support hurdle of 0.7665 (S2). Our short-term oscillators support the notion as well. The RSI slid after it hit resistance at its 70 line and just dipped below 50, while the MACD has topped and fallen below its trigger line. What is more, there is negative divergence between both these indicators and the price action. 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. Therefore, I would consider the medium-term outlook to stay positive and I would treat the current retreat, or any future extensions of it, as a corrective phase for now.

    • Support: 0.7715 (S1), 0.7665 (S2), 0.7615 (S3)

    • Resistance: 0.7780 (R1), 0.7870 (R2), 0.8000 (R3)

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