EU Referendum and Shifting Tides

GBPUSD – technical overview

Despite signs of the potential for a longer-term base, the market remains well capped into rallies, keeping the overall pressure on the downside. A break back above 1.4770 will be required to negate the bearish structure. Until then, rallies should continue to be well capped in favour of topside failures.

• R2 1.4740 – 26May high – Strong
• R1 1.4660 – 7Jun high – Medium
• S1 1.4500– Psychological – Medium
• S2 1.4434 – 20Jun low – Strong

GBPUSD – fundamental overview

There has been a lot of talk over the latest momentum shift back in favour of the remain camp coming from the tragic death of MP Jo Cox. But the reality is that while this event may have contributed to the move back to remain, upgraded warnings this past Thursday from the Bank of England and overall fear of uncertainty in the event of an exit, is what is really driving the momentum shift as we come down to the wire. Weekend polls have also reflected the shift to remain and it comes as no surprise to see the Pound very well bid into the weekly open. Still, trade is expected to be quite choppy in these days ahead of the vote and it’s unlikely we see the market commit too much in either direction until the outcome is revealed.

USDJPY – technical overview

The latest breakdown below the previous 2016 low from May at 105.55 confirms this next lower top at 111.45 and opens the door for the next major downside extension towards a measured move in the 100.00 area. However, daily studies are looking stretched, which could warn of a decent correction higher or period of consolidation before the market thinks about materially extending declines.

• R2 106.42 – 14Jun high – Strong
• R1 105.55 – Previous Base – Medium
• S1 104.08 – 17Jun low – Medium
• S2 103.55 – 16Jun/2016 low – Strong

USDJPY – fundamental overview

Monday’s round of softer Japanese trade data hasn’t factored into trade, with the market more focused on broader risk sentiment. The major pair has managed to trade a little higher on the back of some broad based currency gains as Brexit risk is priced out, though offers continue to keep the market very well capped. Perhaps the latest comments from Sakakibara, the former vice finance minister known as Mr. Yen, are factoring into these offers after saying the 2% inflation target is difficult to achieve and USDJPY may still drop through 100.00.

EURCHF – technical overview

The market has come back under intense pressure in recent trade, with the cross gravitating towards critical medium-term support in the 1.0800 area. Previous dips into this area have been well supported and with setbacks starting to look extended on the daily chart, it’s quite possible the market will once again look to bounce back towards the range highs. Ultimately, a daily close below 1.0700 would however hint at a more significant bearish structural shift.

• R2 1.0923 – 13Jun high – Strong
• R1 1.0910 – 20Jun high – Medium
• S1 1.0850 – 20Jun low – Medium
• S2 1.0778 – 16Jun low – String

EURCHF – fundamental overview

Much of the downside pressure in this cross rate in recent days has come from fear of Brexit and the resulting hedges into the safe haven Swiss Franc as a means to reduce risk. But with momentum noticeably shifting back towards the remain side of the EU referendum vote, it comes as no surprise to see the recovery in EURCHF as risk sentiment recovers. Risk flows will continue to dictate direction in this market into the lead up to the Thursday referendum vote.

AUDUSD – technical overview

The market has entered a period of correction after recently breaking down to fresh multi-day lows at 0.7145. However, any additional upside should be well capped below 0.7600 on a daily close basis, with a lower top sought out ahead of the next major downside extension below 0.7145 and towards the 2016 base at 0.6827 further down.

• R2 0.7570 – 61.8% Fib – Strong
• R1 0.7504 – 9Jun high – Strong
• S1 0.7406 – 20Jun low – Medium
• S2 0.7360 – 17June low – Strong

AUDUSD – fundamental overview

The absence of first tier economic data out of Australia has the Australian Dollar trading along with broader flow into the new week, with the currency well in demand as risk comes back into markets. There has been a clear sentiment shift back to the remain side of the EU referendum and this is fueling a reversal of flow that had been weighing on the risk correlated Australian Dollar. Looking ahead, no data to speak of for the remainder of the day and the focus will be on this broader flow and the upcoming RBA Minutes early Tuesday.

USDCAD – technical overview

The market could finally be in the process of establishing a meaningful base following this latest impressive reversal out from multi-month lows below 1.2500. However, the latest round of setbacks will need to hold above 1.2655 to keep this prospect alive. An eventual break back above 1.3189 will confirm the basing outlook and accelerate gains towards 1.3500 further up. Back under 1.2655 negates and opens a direct retest of the yearly low.

• R2 1.2964 – 17Jun high – Strong
• R1 1.2900 – Figure – Medium
• S1 1.2800 – Figure – Medium
• S2 1.2750 – 13Jun low – Strong

USDCAD – fundamental overview

A healthy resurgence in demand for the Canadian Dollar over the past couple of sessions, with the price action unquestionably driven off the sharp bullish reversal in the price of OIL and renewed wave of momentum back in favour of the remain camp in the EU referendum polling. Lack of data on Monday’s calendar will continue to keep the Loonie focused on the direction in OIL and broader sentiment.

NZDUSD – technical overview

The latest break to fresh 2016 highs beyond 0.7055 suggests the market could be in the process of a more significant structural shift. Still the market will need to establish above critical previous support around 0.7175 to strengthen the bullish prospect, while inability to do so could invite another topside failure. Daily studies have recently rolled over from overbought territory, though a break back below 0.6963 would be required to take the immediate pressure off the topside.

• R2 0.7175 – Previous Support – Strong
• R1 0.7148 – 9Jun/2016 high – Strong
• S1 0.7050 – 20Jun low– Medium
• S2 0.7032 – 17Jun low – Strong

NZDUSD – fundamental overview

Monday’s softer Westpac New Zealand consumer confidence and performance of services showings haven’t done anything to drag on the Kiwi rate, with the market pushing back above 0.7100 and towards the recent 2016 peak at 0.7148 from the other week. It seems risk sentiment flow has been the primary driver with the market feeling a lot better into the new week as Brexit odds are significantly reduced. Looking ahead, lack of first tier data will leave the focus on the sentiment flow.

US SPX 500 – technical overview

The market continues to show signs of exhaustion on rallies above 2100, with the most recent attempt once again stalling out ahead of the 2133, 2015 record high. The recent daily close back below 2085 takes the immediate pressure off the topside and now opens the door for deeper setbacks ahead. But ultimately, a break below 2020 will be required to officially force a shift in the structure.

• R2 2121.00 – 8Jun/2016 high – Strong
• R1 2099.00 – 13Jun high – Medium
• S1 2050.00 –16Jun low – Medium
• S2 2044.00 – 24May low– Strong

US SPX 500 – fundamental overview

US equities have posted an impressive recovery out from Thursday’s low, with the market finding a fresh wave of demand as Brexit odds are reduced. Still overall, the stock market is looking vulnerable at lofty heights, with 2016 rallies continuing to feel like they have very little behind them. The fact that monetary policy is exhausted on a global scale is not something that should be a comfort to investors.

GOLD (SPOT) – technical overview

The recent break above the 2015 peak at 1307 strengthens the case for a longer term base with the market confirming a medium-term higher low in the 1200 area, opening the door for the next major upside extension towards a measured move at 1400. Any setbacks should be very well supported ahead of 1200.

• R2 1350.00 – Psychological – Medium
• R1 1315.80 – 16Jun/2016 high – Strong
• S1 1272.60 – 13Jun low – Medium
• S2 1234.95 – 7Jun low – Strong

GOLD (SPOT) – fundamental overview

GOLD has been very well supported in 2016, with the yellow metal finding solid demand from medium-term players on the back of fears over the limitations of exhausted monetary policy, a downturn in risk sentiment and extended global equities. All of this will almost certainly continue to keep the commodity in demand, with a fresh batch of interest now reported ahead of 1250 as the market prepares for the next big push to 1400 after setting fresh 2016 highs the other week.

Feature – technical overview

USDTRY remains exceptionally well supported on dips, with the latest round of setbacks propped around 2.8800. From here, look for a higher low in favour of the next major upside extension through 3.0120 and back towards a retest of the 2016 high from January at 3.0610. Ultimately, only a daily close below 2.8800 would delay the constructive outlook.

• R2 3.0120 – 24May high – Strong
• R1 2.9685 – 30May high – Medium
• S1 2.8795 –8Jun low – Strong
• S2 2.8435 – 4May low – Medium

Feature – fundamental overview

The CBRT is out tomorrow with its next policy decision and while the most of the market is projecting 50bps of cuts from the Turkish central bank, Goldman Sachs has been ruffling feathers, calling for a milder 25bp cut. This could be helping along this latest recovery in the Lira. But for the most part, the Lira continues to take its cues from broader sentiment flow along with the rest of the emerging market currencies. Certainly this latest reduction in Brexit odds is making investors feel a lot better about reasserting positions in risk correlated markets.