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    IronFX Intraday Comment | EUR/GBP | 16/02/2016

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

    • Earlier in the morning, major oil exporters including Saudi Arabia and Russia reached an agreement to freeze oil output at January’s levels. However, the deal depends on whether other major producers will follow suit and decide to freeze production at those levels. In our view, this is far from an easy case as Iran repeatedly pledged to continue boosting its oil exports. WTI slid following these developments, but we prefer to take a cautious stance for now with regards to the oil outlook. We would prefer to wait for the talks with Iran and Iraq that will take place on Wednesday to end, in order to trust that today’s agreement between the four oil producers in Doha will be respected.

    • In the UK, inflation accelerated to 0.3% yoy in January from 0.2% yoy previously and in line with expectations. However, the core CPI slowed by more than expected. As was expected, the minor rise in the headline inflation was due to base effects and thus, the market shifted its attention on the core print. The pound was trading up ahead of the release, but reversed most of its gains as the slowdown in the core CPI leaves little room for the BoE officials to continue blaming the declining commodity prices for low inflation. On Wednesday, we get the UK employment report, where a decline in the wage growth rate could cause sterling to trade even lower.

    • EUR/GBP traded in a consolidative manner during the European morning Tuesday and at the time of writing it is trading slightly above the 0.7715 (S1) support barrier. Given that the rate remained supported above the upper bound of the 21st of January – 4th of February sideways range, I would expect the forthcoming wave to be positive. A clear move above the 0.7780 (R1) line could reaffirm the case and is possible to carry extensions towards the 0.7870 (R2) zone. Looking at our short-term oscillators, I see that the RSI stands slightly below its 50 line and points sideways, while the MACD, although negative, shows signs that it could start bottoming. These indicators corroborate somewhat my view that the pair could bounce higher. 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 somewhat positive and I would treat the retreat started on the 11th of February 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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