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    IronFX Intraday Comment | EUR/GBP | 19/02/2016

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

    • UK retail sales soared by the most in more than two years, rising 2.3% mom in January from a revised -1.3% mom previously. The figure was well above expectations of a 0.7% mom increase. The main contributors were clothing and electronics, which were boosted by post-holiday discounts. Rising wages in previous months and cheaper petrol prices may have also helped, as they increase consumers’ real income and confidence. However, that trend seems to be losing steam as wages have started slowing down and inflation rose somewhat. GBP/USD edged slightly up at the time of the release, but gave back all the gains immediately and traded lower within the following hour despite the encouraging data. In our view, investors ignored today’s release as they stayed focus on the EU summit and the UK referendum talks. This could keep the pound under pressure until there is an outcome. The meeting has yet to conclude and actually there are some talks that it could be extended until Sunday.

    • EUR/GBP traded somewhat lower during the European morning Friday after it hit resistance at the 0.7780 (R1) line. Given that the rate is still trading above the upper bound of the 21st of January – 4th of February sideways range, I would consider the short-term outlook to stay positive. I would expect a clear move above 0.7780 (R1) to open the way for the next resistance zone of 0.7870 (R2). Nevertheless, for now I see the likelihood for today’s setback to continue for a while, perhaps for another test near the 0.7700 (S1) support zone. Looking at our short-term oscillators, I see that the RSI hit resistance at its 50 line and turned down, while the MACD, although below its trigger line, has turned negative. These indicators corroborate my stance that further retreat could be on the cards before the bulls decide to take the reins again. 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 as well. However, I see negative divergence between our daily oscillators and the price action, which increases the odds for further correction.

    • Support: 0.7700 (S1), 0.7665 (S2), 0.7615 (S3)

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

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