IronFX Intraday Comment EUR/GBP on 14/07/2016

This article is originally referred from IronFX Google+.

• The dollar traded lower against most of its G10 counterparts during the European day Thursday. The top gainers were GBP, EUR and CHF in that order, while the only loser was JPY. The greenback remained virtually unchanged against CAD and NZD.

• The Bank of England kept its benchmark interest rate unchanged earlier today with an 8-1 vote, against expectations of a 25bps rate cut. The Bank noted that most members of the Committee expect monetary policy to be loosened in August and that the exact size and nature of these measures will likely be determined by the August Inflation Report forecasts. Although the Bank appeared ready to do whatever it takes to support the economy, the pound surged on the Bank’s decision to hold its fire today, mainly because the market was pricing in a large probability for a July cut. However, given that officials left the door wide open for action in August, confirming Carney’s comments on policy easing over the summer, we will treat the positive knee-jerk reaction in sterling as providing a strategic selling opportunity. Potentially soft post-referendum data combined with expectations for August easing could bring GBP under renewed selling interest over coming weeks.

• EUR/GBP spiked down during the European morning Thursday, after the BoE kept rates unchanged, disappointing market expectations for a rate cut. The pair fell below the 0.8400 (R1) level, traded below 0.8300 (S1) for a while, but rebounded to trade back above that level. In my view, the short-term outlook remains negative and as a result, I would expect the bears to regain momentum at some point and push the rate back below 0.8300 (S1). Something like that could open the way for the 0.8210 (S2) area. Our short-term oscillators detect negative momentum and amplify the case for further declines. The RSI turned down after it hit its 50 line, while the MACD, already negative, topped and just fell below its trigger line. What’s more, both the indicators stand below their respective downside resistance lines. As for the bigger picture, the rally near 0.8620 confirmed a higher high on the daily chart, something that keeps the medium-term outlook positive. Hence, I would treat the short-term downtrend as a corrective phase.

• Support: 0.8300 (S1), 0.8210 (S2), 0.8140 (S3)

• Resistance: 0.8400 (R1), 0.8455 (R2), 0.8575 (R3)

Original Source: IronFX Google+