Loonie views 24Jun2016


UK Bails on EU-Sterling Crushed

USDCAD Open (6:00 am) 1.2994-97 Overnight Range 1.2716-1.3097

NOTE: The following chart represents the gain (or loss) of G10 currencies against the US dollar from NY close (4pm) to NY Open (6 am)

They called it a historic vote and it was. Whether or not it was the right decision remains to be seen. The United Kingdom voted to leave the European Union in a very close vote that made 51.9% of Brits, happy and the other 48.1% sad.

FX traders scrambled to bail out of sterling and bail they did. After rising to 1.5015 following a quasi-exit poll by YouGov that gave the “Remain” side the lead, just after 2200 GMT yesterday, GBPUSD messed the bed. By 0400 GMT when it was apparent that “Leave” would win, GBPUSD hit 1.3230. Sterling has since bounced back to 1.3810 on profit taking.

The Brexit referendum became a full-blow “risk-off” event. The US dollar soared against the balance of the G10 currencies except Yen. USDJPY collapsed to 99.03 from 105.81. It has also bounced, likely aided by a lingering fear of intervention by the Bank of Japan. British Prime Minister David Cameron has resigned but will hang around as leader until October. Technically he hasn’t resigned but merely given notice. Speaking of notice, Bank of England governor put financial markets on alert stating that the “bank is ready to provide more than £250 billion of additional capital to its normal operations. The Bank of England is also able to provide substantial liquidity in foreign currency”.

The Canadian dollar was collateral damage. USDCAD visited both sides of its entire range in June and did it in less than 5 hours.

FX markets will be very choppy today driven by Sterling. US Durable Goods and the Michigan Consumer Sentiment Index data could add to the turmoil if they surprise to the upside.

USDCAD technical outlook

The intraday USDCAD technicals are bullish following the break of the 1.2820-40 area representing the downtrend line from the mid-June peak. The subsequent break of resistance in the 1.2950-80 area should lead to additional probes of resistance in the 1.3100-1.3200 resistance area. The 100 day moving average is at 1.3092 while the 200 day moving average is at 1.3322. For today, USDCAD support is at 1.2980 and 1.2900. Resistance is at 1.3080, 1.3120 and 1.3160.

Chart: USDCAD 4 hours

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Author: Loonieviews

In the past 30+ years, I have been an FX interbank market making trader, a high performing FX and Derivatives Sales person, creator of simple and complex risk mitigation strategies and a manager of high performance FX teams. The Trade of the Day is a culmination of that experience. Retail FX traders have access to a well-crafted and carefully researched FX trade strategy designed to generate FX profits while mitigating losses.

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