WorldWideMarkets Community

Forex Trading, Market News & Technical Analysis

US FX Market Open – Monday, June 27, 2016: BREXIT CONTAGION FEARS IN THE MIX

Posted by Marge Maresca on Jun 27, 2016 7:53:29 AM


Overnight Events

• GBP/USD -3.3%, USD/JPY -0.4%, EUR/USD -0.7%
• DXY +0.13%, DAX -1.5%, Brent +0.08%, Iron +6.0%
• DE Merkel-must act to prevent other countries fleeing EU
• UK Dep. Labour leader, Tom Watson tells Jeremy Corbyn to resign
• Corbyn witnessed weekend shadow cabinet resignations-3-more today
• Osborne-UK public finances would suffer as a result of the vote to leave the EU
• Osborne-New fiscal measures would not be proposed until a new PM in place
• SNB sight deposits sharply higher latest week
• EZ May M3 4.9% vs 4.6% prev, 4.8% exp
• EZ May Loads To Non-Financials 1.4% vs 1.2% prev, 1.2% exp
• Japan PM Abe – Instructed FinMin Aso to take necessary FX steps
• Japan govt mulls boosting stimulus package to over 10 tln yen - Rtrs
• BoJ DepGov Nakaso – No problems so far in market liquidity
• MoF Asakawa – Market trying to find new equilibria – Rtrs
• Ex-BoJ Momma – BoJ can stand pat if Brexit turmoil temporary – Rtrs
• Japan LDP Inada – Bold new steps to stem JPY rise needed – NHK, Nikkei
• IMF Lagarde – Mkt vastly underestimated Brexit vote but no panic –Rtrs
• BIS - Urgent need for global policy action, cites “risky trinity” Rtrs
• BIS- central  banks to smooth Brexit-related turmoil – Rtrs
• Germany CDU Krichbaum – Scotland welcome to join EU – Wa-Sonntag

Currency Summaries

• GBP feels the pain of Brexit but EUR/GBP takes all the strain today
• EUR/USD a fairly quiet 1.1015-1.1084 in Europe compared cable -3%
• Close below 200-DMA bearish:
• Weaker CNY underpinning EUR:
• Risk Brexit contagion adds to bearish techs for likely fall towards 1.08
• Strong real money buying has underpinned EUR/USD since Friday

• USD/JPY rose to 101.47 to 102.50 on intervention fears in Asia
• Risk aversion linked to Brexit fallout pushes post lower again in London
• Spot offers in decent size @102.70
• USD/JPY & EUR/JPY trade in tandem. 48/72H log correlations +0.97/+0.96
• EUR/JPY has has been a wide 111.66-113.24

• Risk off CHF demand on UK uncertainty: Chart:
• SNB sight deposit data confirms Friday's intervention
• Data does not include full extent of Friday's SNB action
• EUR/CHF hit 1.0623 low Friday: Level not seen since Aug 2015
• SNB clearly active and can expect more support/smoothing this week
• Weekly cloud top 1.0785 initial res. and early 1.0715 early low the supp.

• GBP/USD has fallen to a fresh 31yr low of 1.3208 amid huge uncertainty
• Uncertainty fuelled by Britain’s vote to leave the EU
• Bear targets include 1.30, 1.25, 1.20 & 1.10 (1.05 was 1985 low)
• EUR/GBP rose by over a penny to a 27mth high of 0.8343
• Bull targets include 0.85, 0.90, 0.95 & 1.00 (0.9805 = euro lifetime high, 2008)

• USD/CAD eased to a European am low of 1.2995
• There is a 1.3000 option expiry for the NY cut ($214mn strike)

• AUD/USD elicited support circa 0.7425 after retreating from 0.7451
• 0.7451 = European am high. 0.7425 option expiry for NY cut, A$561mn strike
• 0.7460 was early Asia high. 0.7385 = Asia low

• NZD/USD met headwind at 0.71 during the European am
• 0.7045 was Asia low. 0.7040 & 0.71 expiries for NY cut, NZ$252mn & NZ$180mn strikes

Today’s events

An expiring FX option heading into the New York Cut, if close enough to the strike price, can act as a magnet for selling/buying.  If the option is large, it can generate enough trading to move the market.  

Option Expirations (Source:ThompsonReuters)

• Brexit outcome saw vols spike across the board then ease pre weekend
• Uncertainty keeps a bid under vol curves going forward
• Liquidity still a concern, bid/ask spreads wide, volumes light
• GBP/USD 1mth 12.5-37.0-22.0 Friday and EUR/GBP 1mth 13.0-21.0-19.0
• EUR/USD 1mth 9.2-23.0-13.5 Friday, demand from 12.25 today
• USD/JPY downside fears keep 1mth risk rev’ near 6yr high for JPY calls  

Economic Data(Source:Bloomberg)


Topics: US FX Market Open


Tools & Educational Resources

Forex 101LEARN MORE >>
Learn the basics of Forex and how to practice trading the markets.

GlossaryLEARN MORE >>
Confused by the language? Click here and search for key trading terms.

Browse our frequently asked questions and find your answers right away.

Access to the educational lessons, webinars and platform walkthroughs.


Get started with a FREE $10,000 Demo Account and experience the Forex Market RISK FREE!