Brexit in Play, Markets in Turmoil

GBPUSD – technical overview

The major pair has collapsed, taking out the entire year’s range in a single day, in what could prove to be the most intense bearish outside day on record, after initially surging to a 2016 high. The drop below the previous multi-year base from earlier this year at 1.3836 has accelerated declines to +30 year lows. At this point, technical studies are violently extended, though the focus is now on next major psychological support at 1.3000. Any rallies should be well capped into the previous base 1.3836 base and ahead of 1.4000. A daily close back above 1.4000 will now be required to alleviate immediate downside pressure.

• R2 1.4000 – Psychological – Strong
• R1 1.3836 – Previous Base – Strong
• S1 1.3228– 24Jun/2016 low – Medium
• S2 1.3000 – Psychological – Strong

GBPUSD – fundamental overview

In a shocking twist, catching the market off guard and then some, the UK has voted to leave the EU, with Brexit now in play. The Pound has been making some record moves on this historic day. After initially trading to a 2016 high above 1.5000 in the early hours of the day, the news that polls were showing leave out in front soured the tone dramatically, with the UK currency ultimately tumbling to +30 year lows below 1.3500. Fear of rating agency credit downgrades are now making the rounds and the market will be anxious to hear from the UK government and BOE over a potential response or easing of monetary policy.

USDJPY – technical overview

The downtrend remains firmly intact with the market collapsing to fresh 2016 lows below critical psychological barriers at 100.00, exposing next key medium-term support in the form of the June 2013 base at 93.80. Daily studies are however tracking in oversold territory, which could warn of some form of a correction and period of consolidation before the market considers any additional meaningful declines. Still, any rallies should not be well capped below 106.00.

• R2 106.81 – 24Jun high – Strong
• R1 103.55 – Previous Base – Medium
• S1 98.99 – 24Jun/2016 low – Medium
• S2 95.00 – Psychological – Strong

USDJPY – fundamental overview

News of the Brexit victory has rocked the major pair to fresh two and a half year lows below 100.00, with liquidity thinning out dramatically and the Yen bearing the brunt of the intense flight to safety flow. However, there has since been chatter of MOF action, and the major pair has managed to recover well of the lows in response. Trading conditions are expected to be quite volatile for the remainder of the day, with the market likely to pay very little attention to US durable goods and Michigan sentiment, firmly focusing on digesting the implications of this latest unsettling development.

EURCHF – technical overview

The latest drop below 1.0700 is a significant development and could warn of a structural shift putting pressure back on the downside. Look for a daily close below 1.0700 to confirm the bearish outlook, opening the door for a drop back towards next key support around 1.0500. However, should the market manage to hold above 1.0700, it could leave the outlook more constructive and invite renewed demand.

• R2 1.0923 – 13Jun high – Strong
• R1 1.0778 – 16Jun low – Medium
• S1 1.0623 – 24Jun/2016 low – Medium
• S2 1.0530 – 31Jul 2015 low – Strong

EURCHF – fundamental overview

A fresh wave of unwanted inflow into the Franc on the back of this latest shocking news of the UK voting to exit the EU. The unsettling development has invited the safe haven bids, with the SNB sitting very uneasy and likely to step in at some point to intervene on behalf of the overvalued Franc. The market has since stabilized after taking out critical support at 1.0700, but things will get more intense if the cross rate inches closes to 1.0500 and certainly back towards 1.0000.

AUDUSD – technical overview

The latest topside failure suggests the market is looking to carve a lower top below the 2016 high at 0.7835, in favour of the next major downside extension. Look for a break below 0.7145 to confirm the 0.7647 lower top, opening the door for an acceleration back towards the 2016 low at 0.6827 further down. A daily close back above 0.7500 would be required to alleviate immediate downside pressure.

• R2 0.7491 – 23Jun low – Strong
• R1 0.7406 – 20Jun low – Medium
• S1 0.7285 – 16Jun low – Medium
• S2 0.7145 – 24May low – Strong

AUDUSD – fundamental overview

The Australian Dollar is not immune to the fallout from the EU referendum, with the currency pulling back quite sharply against the Buck after being so well bid up in recent sessions. The UK’s decision to vote out of the EU has caught global markets off guard, and is weighing on the risk correlated commodity currency. Aussie will continue to digest the implications of the Brexit vote and won’t pay much attention to US durable goods and Michigan sentiment data later today.

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. A higher low looks to be carving at 1.2655 with a break back above 1.3189 to confirm the higher low and basing outlook, opening an acceleration of gains towards 1.3500 further up. Only back below 1.2655 negates.

• R2 1.3296 – 24Mar high – Strong
• R1 1.3189 – 24May high – Strong
• S1 1.2861 – 20Jun high – Medium
• S2 1.2655 – 8Jun low – Strong

USDCAD – fundamental overview

The Canadian Dollar is having a rough go along with most of the rest of the currency market on Friday. News of the UK vote to leave the EU has come as a shock to the market and the risk correlated Canadian Dollar has suffered as a result. Dealers report stops above 1.3200 and the uncertainty from this event could very well drive the market through that level later today. Certainly the sharp retreat in the price of OIL isn’t doing anything to help the Loonie’s cause. There is no data of note out of Canada and the market won’t pay much attention to US durable goods and Michigan sentiment with all that has gone on.

NZDUSD – technical overview

The rally to fresh 2016 highs has stalled out, with the market sharply reversing course after trading up just shy of 0.7300 in early Friday trade. The resulting price action has set up the potential for a very bearish outside day formation. Look for a daily close below 0.6963 to officially confirm the bearish shift and open a further drop to next key support at 0.6675 further down.

• R2 0.7297 – 24Jun/2016 high – Strong
• R1 0.7148 – 9Jun high – Medium
• S1 0.6963 – 15Jun low– Strong
• S2 0.6893 – 7Jun low – Medium

NZDUSD – fundamental overview

All of the positive flow in the New Zealand Dollar over the past several days has evaporated in a heartbeat, with the currency descending sharply off the early Friday 2016 high on the back of this latest news of the Brexit vote. Kiwi is a currency very tied to risk given its higher yield amongst the developed currencies and as such, will continue to be tied to the fate of the market’s attitude towards the UK exit. Certainly the RBNZ will be relieved to see the local currency off recent unwanted elevated levels.

US SPX 500 – technical overview

The latest intense drop back below critical support at 2020 officially puts the pressure on the downside, opening more pronounced declines over the coming sessions. Friday’s failure to clear the record high from 2015, followed by this wild pullback now opens the door for a deeper drop to the 2016 base at 1808. Any rallies from here should be very well capped ahead of 2080.

• R2 2128.00 – 24Jun/2016 high – Strong
• R1 2050.00 – 16Jun low – Medium
• S1 2000.00 –Psychological – Medium
• S2 1968.00 – 10Mar low– Strong

US SPX 500 – fundamental overview

The US equity market is really going to be put to the test in the days ahead. The market has collapsed in early Friday trade on the back of the shocking news of the UK voting to exit the EU. The expectation is that this event could now pose a systemic threat to the global economy. And even if governments and central bank’s try to prop the market up as they have done since the 2008 financial crisis, with monetary policy tools exhausted, there isn’t a lot of incentive left in the tank. This could ultimately open the door for a more accelerated decline back to the 2016 lows just ahead of 1800. The market will shrug off local data for now and focus on the implications of this event for the remainder of the day.

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 1400.00 – Measured Move – Strong
• R1 1358.45 – 24Jun/2016 high – Medium
• S1 1250.30 – 24Jun 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 in Friday trade following this latest unsettling news of the UK voting to leave the EU.

Feature – technical overview

USDTRY remains exceptionally well supported on dips, with the latest round of setbacks propped around 2.8400. 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 2.8400 would delay the constructive outlook.

• R2 3.0120 – 24May high – Strong
• R1 3.0000 – 24Jun high – Medium
• S1 2.8395 –24Jun low – Strong
• S2 2.7895 – 2May/2016 low – Strong

Feature – fundamental overview

A dramatic turn of events for the Lira over the past several hours, with a very bid currency on Thursday getting absolutely crushed in Friday trade. The impact of the British exit on emerging markets could be catastrophic, with the event posing serious systemic risk to the global economy. Emerging markets are at the top of the list when it comes to assets exposed, and so, we are seeing a rapid depreciation in the Lira as a result. The market will continue to track with broader sentiment as the implications of Brexit are digested over the coming days.