U.S. Dollar Trading (USD) gaining across the board on safe haven demand with the notable exceptions of Gold and Yen. Any question of whether EUR/USD would fall in sympathy with the GBP is now clear as EUR/USD broke below 1.1000 Friday and has opened under pressure Monday. Although the FED is now likely to hold for the rest of the year the negative impact on the USD wont be seen until stability is seen in the UK. This week is very light on economic data so all the focus will be on GBP and Stockmarkets. Emergency Central Bank meetings are a possibility if volatility increases.
The Euro (EUR) the same way that the FED is on hold the prospects of new stimulus to stabilize the Eurozone is going to be on the cards going into the next ECB meeting. More dangerous to the EUR/USD outlook though is contagion concern that other EU countries will vote to leave. So far there have been no new calls for referendums in other countries but populism is on the rise throughout the region. The Sterling (GBP) opened down -1.5% under 1.3500 as no political stability was seen over the weekend. Indeed more uncertainty seemed to been seeded as talks of a Scottish referendum and potential Scottish block of the UK vote to leave in parliament clouding the way forward. European officials have been keen to see the UK leave quickly to limit the disturbance to the Eurozone.
The Japanese Yen (JPY) was able to rebound off Y100 a few times and has stabilized at Y102. The BOJ and MOF have warned they will intervene on one sided moves and the sharp reversal from Y99 to Y103 on Friday will keep the sellers cautious on any move under Y100 if the risk off trade continues. As the top FX Safe Haven the Yen will likely remained supported in the coming weeks bar some sort of major new BOJ move. The Australian Dollar (AUD) up by the stairs and down by the elevator is the usual way for the risk sensitive commodity pair the Australian dollar. Friday was no exception plunging from above 0.76 and on a very strong footing to 0.7350 lows. The bounce to 0.7450 will likely struggle to break above 0.7500 as the previous resistance now should contain. OIL/USD has struggled and this has led the Canadian dollar to be even weaker than the AUD but the NZD so far has managed to hold its uptrend. Keep an eye on EUR/AUD as if this rallies the selling in AUD may become more aggressive.
Stocks Indices(DAX) fell 10% with the FTSE as the markets plunged on the huge wave of uncertainty going forward for Europe. The chances of further falls are high with the ability of central banks to intervene limited and the time required to find a path forward requiring weeks or months. US Stocks (DOW) fell in sympathy with Europe but the moves were smaller and there is some support as US stock markets remain the safest choice for global investors.
Pairs to watch
EUR/USD 1.1000 the key psychological level
GBP/USD 1.3230 lows the first support with 1.3000 the target
Economic Data Ahead
Nothing Planned but keep eye out for emergency central bank meetings
By Anthony Darvall (TonyD)