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    IronFX Intraday Comment | GBP/JPY | 17/02/2016

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

    • As the talks between Iraq, Iran and Venezuela on oil production have yet to conclude, the most noteworthy data released during the morning was the UK employment report for December. The unemployment rate remained unchanged at 5.1%, missing expectations of a decline to 5.0%. Average weekly earnings slowed to 1.9% yoy from a revised 2.1% yoy previously, as expected. Sluggish wage growth suggests that underlying price pressures are likely to remain weak in the foreseeable future, something that leaves little room for BoE officials to consider a rate hike during the year. The pound slid following the release of the report, but recovered immediately and traded even higher in the following minutes. In any case, we stick to the view that perhaps the biggest obstacle to a potential BoE rate hike in 2016 is the uncertainty surrounding the Brexit referendum and the risks that it poses to the UK financial stability. Therefore, we believe that the market is more focused on Friday’s European Council meeting, which could shed some light on Britain’s future in the EU and as a result determine the sterling’s near-term direction.

    • GBP/JPY traded higher during the European morning Wednesday after it hit support at the crossroad of the downtrend line taken from the peak of the 3rd of February and the 161.70 (S1) line. Bearing that the rate saw this prior downtrend line as a support this time, I would expect the forthcoming wave to be positive, perhaps for another test at 165.70 (R1). Further advances are also supported by our short-term oscillators. The RSI has turned up again and looks able to move above its 50 line soon, while the MACD, although negative, also shows signs of bottoming and could move above its trigger line. On the daily chart, the price structure still suggests a longer-term downtrend. Therefore, I would treat the recovery from 159.70 (S2), or any extensions of it, as a corrective phase for now.

    • Support: 161.70 (S1), 159.70 (S2), 158.00 (S3)

    • Resistance: 165.70 (R1), 167.00 (R2), 169.00 (R3)

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