Buy the Rumor, Sell the Fact?

GBPUSD – technical overview

Signs of the formation of a meaningful longer-term base, with the market pushing above a multi-week range, ascending to fresh 2016 highs. From here, look for setbacks to be well supported ahead of 1.4300 in favour of the next big push towards 1.5300-1.5500. Ultimately, only back below 1.4000 would negate the newly adopted constructive outlook.

• R2 1.4945 – 24Dec 2015 high – Strong
• R1 1.4844 – 23Jun/2016 high – Medium
• S1 1.4708– 23Jun low – Medium
• S2 1.4616 – 21Jun low – Strong

GBPUSD – fundamental overview

The EU referendum has finally arrived and the event will consume the market over the next 24 hours until the results become official. Voting opens at 6GMT and runs through 21GMT. Initial results are expected to start trickling in around 23GMT, with more clarity on the outcome by 6GMT on Friday. At this point, there has been a clear bias towards the remain camp, with price action confirming. The Pound has broken up to a fresh 2016 high on Thursday, not looking too concerned about Brexit risk. The final wave of polls have been helping to support the Pound, with the results cementing the remain camp position. On the data front, we get US initial jobless claims, US new home sales, and US leading indicators, though the central focus will be on the referendum.

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. Look for a break below the recent 2016 low at 103.55 to strengthen the outlook and accelerate declines. Any rallies should now be well capped ahead of 108.00.

• R2 105.55 – Previous Base – Strong
• R1 105.06 – 21Jun high – Medium
• S1 104.00 – Figure – Medium
• S2 103.55 – 16Jun/2016 low – Strong

USDJPY – fundamental overview

Japan manufacturing PMIs came in slightly better than the previous print but still managed to put in the fourth consecutive monthly contraction. Meanwhile new orders did a good job of improving. The major pair hasn’t really done all that much of late, seemingly more content in consolidation mode until the EU referendum results are official. While bids on expectations for a remain outcome are supporting the major pair, comments from BOJ dissenter Kiuchi are weighing. Kiuchi continues to express his concerns with current policy and worries about the effectiveness of negative interest rates and additional accommodation. The central banker also believes the market has an overly heightened expectation for additional BOJ easings. Looking ahead, Thursday is all about the EU referendum, though we do get a batch of US data featuring initial jobless claims, new home sales, and leading indicators.

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 the referendum results early Friday.

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 0.7600 – Figure – Medium
• R1 0.7570 – 61.8% Fib – Strong
• S1 0.7441 – 22Jun low – Medium
• S2 0.7406 – 20June low – Strong

AUDUSD – fundamental overview

Not much driving the Australian Dollar right now other than the EU referendum. The commodity currency is tracking along with risk sentiment and an expectation the remain vote will win out early Friday. If confirmed, this could open another jump towards next key resistance into the 0.7570 to 0.7600 area. Still, it’s worth considering that once the event risk is finally behind us, we could see a ‘sell the fact’ type reaction with the market having done a good job in the lead up to the vote pricing in the remain outcome. As far as data for the remainder of the day goes, we get a batch of US releases featuring initial jobless claims, new home sales, and leading indicators.

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 1.2742 – 22Jun low – Medium
• S2 1.2655 – 8Jun low – Strong

USDCAD – fundamental overview

Price action in the Canadian Dollar has been more than just about the EU referendum over the past 24 hours. The Loonie tried to reassert on Wednesday after Canada retail sales exceeded expectation, but was unable to mount a successful campaign as OIL prices pulled back sharply on news inventories didn’t drop as much as anticipated. But of course, the EU referendum variable is winning out right now, with the Loonie clawing its way back into Thursday as the market is feeling better about itself with the odds favouring the remain outcome. As far as Thursday data goes, the Canada calendar is empty, with the key focus on US releases featuring initial jobless claims, new home sales, and leading indicators.

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 a weekly close 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 0.7232 – 10Jun 2015 high – Strong
• R1 0.7199 – 23Jun/2016 high – Medium
• S1 0.7102 – 21Jun low– Medium
• S2 0.7050 – 20Jun 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. This latest wave of demand has been driven off improved global sentiment as the market becomes more confident the ‘remain’ vote will prevail in today’s EU referendum. Still, there is a good amount of concern over the elevated Kiwi exchange rate, which could get the RBNZ thinking more seriously about another rate cut at its upcoming meeting. For today, the focus will be squarely on the EU referendum and its impact on sentiment, while US data featuring initial jobless claims, new home sales, and leading indicators will take a major backseat.

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. But ultimately, a break below 2020 will be required to officially force a shift in the structure and accelerate declines towards the yearly low ahead of 1800.

• 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, even in the event of an EU referendum remain victory, the stock market will be 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 going forward. And while the market will be able to feel more at ease if the UK votes to stay in the EU, this latest ordeal should only serve as a reminder that the global economy isn’t in a good position to handle the emergence of any new threats.

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 1240 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

The Lira hasn’t been hurt in any way thus far from this week’s as expected decision to slash rates 50bps. It seems the combination of the event being priced in and the market’s clear focus on improving sentiment in light of the expectation the EU referendum will produce a victory for remain, have been the major drivers behind this wave of demand for the Lira and risk correlated emerging market FX on the whole. Still, there is risk that once the EU referendum confirms the expected remain result, the market will then dump Liras on a ‘sell the fact’ reaction.