EU Referendum Just One Day Out

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. Though we did see a break to fresh multi-week highs on Tuesday, inability to establish a daily close above the previous range peak at 1.4770 opens the door for yet another topside failure. A daily close above 1.4800 will now be required to trigger a more significant structural shift.

• R2 1.4783 – 21Jun high – Strong
• R1 1.4700 – Figure – Medium
• S1 1.4600– Figure – Medium
• S2 1.4500 – Psychological – Strong

GBPUSD – fundamental overview

After enjoying a massive multi-session rally, the Pound finally relented on Tuesday, but not before posting multi-week highs. It seems the market got a little jittery on news of the latest Survation poll showing remain and leave virtually neck and neck at 45% and 44% respectively. At the same time, with the Pound so well bid and the vote still yet to be determined, it was only natural to see some profit taking ahead of the event risk. Overall, we seem to be heading into the referendum back where we were a few weeks back with polls close, but slightly favouring remain, while betting houses feel much more confident with the remain outcome. Looking ahead, with the election just a day away, the focus will continue to be on pre-referendum positioning.

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, with daily studies recently trading into oversold territory, there is scope for a mild correction to allow for these studies to unwind before heading lower. Tuesday’s bullish outside day formation strengthens the outlook. But any corrective rallies should ideally be well capped ahead of 108.00.

• R2 105.55 – Previous Base – Strong
• R1 105.00 – Psychological – Medium
• S1 104.00 – Figure – Medium
• S2 103.55 – 16Jun/2016 low – Strong

USDJPY – fundamental overview

Price action in the major pair on Tuesday was interesting, though seemingly mostly technical in nature. Overall, the tone on Tuesday was more risk off than anything else, and yet, despite the flow, USDJPY managed to mount a decent recovery. Jitters on the EU referendum front failed to weigh on the pair, while later in the day, Yellen testimony offered nothing new, pretty much echoing last week’s cautious FOMC statement. The Fed Chair did however add somewhat dovishly that she would like to see the economy on a ‘favourable path’ before hiking rates. Looking ahead, most of the attention will be on referendum headlines, with only US existing home sales and another day of Yellen testimony standing out on the calendar.

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 1.0798 – 21Jun 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 improves. Risk flows will continue to dictate direction in this market into the lead up to tomorrow’s referendum vote. Looking ahead, we get Swiss ZEW expectations.

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 0.7513 – 21Jun high – Strong
• S1 0.7406 – 20Jun low – Medium
• S2 0.7360 – 17June low – Strong

AUDUSD – fundamental overview

The Australia Westpac leading index and skilled vacancies showed improvement from previous prints and may be helping to support Aussie a bit into Wednesday, though the second tier data isn’t going to have too much of an influence on the market. More importantly, Aussie will continue to track risk sentiment flow, with most of the market’s attention on the upcoming EU referendum and potential implications on the global economy. Otherwise, later today we get US existing home sales and another round of Yellen testimony.

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 1.2763 – 21Jun 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 ongoing support for the price of OIL and renewed wave of momentum back in favour of the remain camp in the EU referendum polling. Looking ahead, the market will continue to track EU referendum headlines and OIL prices, while also taking in Canada retail sales, US existing home sales and a second day of Fed Yellen testimony.

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 0.7169 – 21Jun/2016 high – Strong
• S1 0.7050 – 20Jun low– Medium
• S2 0.7032 – 17Jun low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has been very well bid in recent trade, with the currency rallying up to a fresh 2016 high against the Buck in Tuesday trade. This latest wave of demand has been driven off improved global sentiment as the market becomes more confident the ‘remain’ vote will prevail in the EU referendum. Improving New Zealand visitor arrivals could also be helping to bolster Kiwi a bit into Wednesday. Looking ahead, referendum headlines, US existing home sales and another day of Yellen testimony are in focus.   

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, US existing home sales and another day of Yellen testimony.

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 1250.00 – Psychological – 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

Contrary to some expectations, the CBRT didn’t appear too concerned with the risk of a Brexit outcome, opting to chop another 50 basis points off the top end of the rates corridor, taking the overnight lending rate to 9.0%. This inspired a mild wave of renewed offers in the Lira, which had been benefiting in recent days from improved global sentiment on diminished Brexit odds. Another major factor behind the central bank’s decision was the notable decline in 12 month inflation expectations. Looking ahead, EU referendum headlines and a second day of Yellen testimony will be the major focus for the emerging market currency.