London Forex Report: Britain goes to the polls to decide whether the country should remain in the European Union. An estimated 46.5 million peoples may take part in the vote and recent surveys have shown a close call between the “Leave” and “Remain” vote, heightening financial markets volatility. Prevailing concerns were also raised by US Fed Chair Janet Yellen during her testimony to the Senate Banking Committee who said that Brexit will pose significant risk to the US economy and global financial market stability. Amid uncertainties on global development, Yellen added that “cautious approach remains appropriate”, offering little hint on timing of the next rate hike. On the data front, US existing home sales print showed that the economy was on solid footing in 2Q, supported by loose credit conditions. Home sales rose 1.8% MOM to an annualized pace of 5.53 million units in May, the highest level since Feb 2007. USD extended its decline on fading Fed policy outlook. USD Index slipped lower through European and US trades, settling 0.32% lower at 93.71.
FX Majors: EUR European Central Bank said Governing Council reinstates waiver of minimum credit rating requirements for marketable instruments issued or guaranteed by Greek government. GBP reached the strongest level this year hours before the landmark UK vote on membership of the European Union was set to begin. A gauge of sterling against a basket of currencies advanced for a second day before today’s referendum after a Comres poll showed 48% “Remain” and 42% “Leave”, while a YouGov survey indicated backing for a vote to stay was ahead 51% to 49% JPY hit an intraday high of 104.85 yesterday amid two polls came in post New York session close suggested that “Remain” camp leading. Most Japanese firms support the government’s decision to put off a hike in the national sales tax by more than two years due to weakness in the economy, according to a Reuters poll showed yesterday.
EUR/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bullish
Technical: Whipsaw price action within broader 1.11/ 1.14 range, 1.1230 near term support but range trade most likely ahead of the UK referendum results.
Retail Sentiment: Bearish
Trading Take-away: Sidelines
GBP/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish
Technical: 1.4770 symmetry swing objective achieved and price duly stalls, while 1.4530 supports expect bullish consolidation ahead of results expected overnight from the UK Brexit vote. Expect volatility in GBP pairs next 24hrs.
Retail Sentiment: Neutral
Trading Take-away: Neutral
USD/JPY
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Technical: Downside ratchet breaks 105.55 lows the failure at 105 opens 103 as the next downside objective. 105.50 becomes the near term pivotal resistance. Potential daily double bottom pattern developing need a close over 104.85 to entice bulls.
Retail Sentiment: Bullish
Trading Take-away: Sidelines
EUR/JPY
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Technical: Weekly equality objective at 117.36 achieved. 119.30 near term resistance, only over 121.50 eases bearish pressure, while 119.50 caps upside bears target retest of 115.50 lows
Retail Sentiment: Bullish
Trading Take-away: Sidelines
Commodities FX: Gold fell to a two-week low of $1,261.27 an ounce before closing 0.15% lower at 1,266.22 due to reduced concerns over Brexit. Oil (July contract) fell $0.72, or 1.4%, to settle at $49.13 a barrel after EIA reported a smaller than expected stockpile decline of 917,000 barrels (1.7m expected) for the week ended June 17. AUD Australia’s Westpac leading index grew 0.2% MOM in May after a downwardly revised 0.14% MOM increase in April. The survey continued to point to below trend growth although drag from sluggish commodity prices was diminishing. AUD consolidated recent gains yesterday with investors remain to the sidelines before Britain votes on whether to stay in or leave the European Union. The vote still looks too close to call and a win for the ‘leave’ side was likely to cause chaos in global markets. CAD weakened against the USD, pulling back from an earlier 12-day high as oil fell with traders caution ahead of the British referendum. Traders believe the loonie would weaken and the chances that the Canadian central bank cuts interest rates may jump if Britain votes to leave the European Union.
AUD/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Technical: Remains bid, close over .7510 opens .7640 target, only below .7430 concerns near term bullish bias
Retail Sentiment: Neutral
Trading Take-away: Neutral
USD/CAD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Technical: Weakness below 1.28 opens 1.2650 next within broader 1.26/1.31 trading range.
Retail Sentiment: Bullish
Trading Take-away: Sidelines
XAU/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bullish
Technical: Failure below 1275 sets up a bearish double top pattern targeting a rotation back to test 1230 support, only a close over 1293 would neutralise the near term bearish pattern.
Retail Sentiment: Bearish
Trading Take-away: Sidelines
US OIL
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish
Technical: Only a close below 46 threatens medium term bullish bias, as 46.00 survives on a closing basis expect rotation back towards 50.00 where a second wave of selling is likely to emerge. Sellers at 50.00 failed to stem the advance opening a retest of 51.64.
Retail Sentiment: Bearish
Trading Take-away: Sidelines
