Beyond EU Referendum Headlines

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 1.4719 – 20Jun high – Medium
• S1 1.4600– Figure – Medium
• S2 1.4500 – Psychological – Strong

GBPUSD – fundamental overview

The Pound is coming off one of its largest single day gains in quite some time, with EU referendum momentum swinging decidedly back in favour of the remain camp. Just last week, odds of Brexit were up at around 40% and only days later the market is pricing a much smaller 25% chance of Brexit. Still, with the Pound racing back to key multi-day range high territory and with risk still out there until the results become official in the early hours of Friday trade, it’s unlikely we see the UK currency extend much further at this point. Looking ahead, we get UK public finances and UK CBI trends along with an appearance later in the day from Fed Yellen in front of the Senate banking panel.

USDJPY – technical overview

The latest breakdown below the previous 2016 low from May at 105.55 confirms a 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 or period of consolidation before the market thinks about materially extending declines.

• R2 105.55 – Previous Base – Strong
• R1 104.84 – 20Jun high – Medium
• S1 103.55 – 16Jun/2016 low – Strong
• S2 103.00 – Figure – Medium

USDJPY – fundamental overview

Although Monday’s surge in risk sentiment on reduced risk of an EU exit helped to keep the major pair supported, the combination of broad based currency gains against the US Dollar and comments from FinMin Aso have managed to offset US Dollar demand against the Yen, with the major pair still hovering just off recent yearly and multi-month lows. FinMin Aso was out with comments the BOJ wouldn’t be so quick to step in with an intervention and this has kept the major pair weighed down into Tuesday. USDJPY will continue to keep an eye on EU referendum headlines on Tuesday while also making sure there are no hiccups from the German court ruling on the ECB’s OMT. Also up later in the day is a Fed Yellen appearance in front of the Senate banking panel.

EURCHF – technical overview

Dips into the 1.0800 area continue to be well supported, with scope for this latest bounce to open a recovery back towards the range highs in the 1.1130-1.1200 area. Ultimately, a daily close below 1.0700 would be required to 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. On Tuesday, the market will also be monitoring developments out from the German court ruling on the ECB’s OMT.

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

Although the Aussie house price index came in softer, the focus was more on the release of the RBA Minutes, which on net, proved to be Aussie supportive. While the Minutes highlighted risks to a higher Aussie rate and a slowdown in the labour market, it also felt comfortable with rates at current levels and believed current rates to be consistent with sustainable growth. There had been some speculation the RBA would lean more dovish in the Minutes and failure to do so has opened relative outperformance in Tuesday trade. Looking ahead, broader risk sentiment flow and a Fed Yellen appearance on monetary policy before the Senate banking panel are the key standouts for the remainder of the day.

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 1.2861 – 20Jun high – Medium
• S1 1.2750 – 13Jun low – Medium
• S2 1.2655 – 8Jun 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 Tuesday’s calendar will keep the Loonie focused on the direction in OIL and EU referendum headlines and a Fed Yellen appearance on monetary policy before the Senate banking panel.

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 and a Fed Yellen appearance on monetary policy before the Senate banking panel.

US SPX 500 – technical overview

The market continues to show signs of exhaustion on rallies above 2100, with the latest 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 2102.00 – 20Jun 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 last Thursday’s low, with the market finding a fresh wave of demand as Brexit odds are significantly 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. For today, the key focus will be on headlines relating to the EU referendum, a German court ruling on the ECB’s OMT and appearance from the Fed Chair on monetary policy in front of the Senate banking panel.

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.

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 2.9560 – 16Jun high – Medium
• S1 2.8795 –8Jun low – Strong
• S2 2.8435 – 4May low – Medium

Feature – fundamental overview

Goldman Sachs has been out calling for a smaller 25bp cut from the CBRT today, while there are others supporting this view on the theory that a 50bp cut would be too damaging to the Lira if Thursday’s EU referendum then results in a Brexit vote. But with odds of Brexit significantly reduced and with inflation coming back down of late, the overall consensus still seems to be leaning to 50bps of cuts. The Lira has performed well over the past few sessions as risk comes back into the market on diminished EU exit fears and it’s headlines relating to the EU referendum and the CBRT decision that will be the primary focus on Tuesday. Still, an appearance from the Fed Chair on monetary policy in front of the Senate banking panel should not be overlooked.