U.S. Dollar Trading (USD) was in demand Monday with global stock markets taking another leg lower with little respite so far post Brexit. The downside may slow down now as GBP/USD gets closer to 1.3000 which was seen as the target for Brexit sellers. Some talk of a second UK referendum yesterday by the UK minister of health has yet to gain traction and PM Cameron threw cold water on such speculation suggesting the first vote be respected. S&P joined the other rating agencies in downgrading the Sovereign Credit Rating to AA from AAA.
The Euro (EUR) Sellers took control Monday but so far 1.1000 has remained firm and we have closed just above the figure at 1.1015. Markets are skittish on the single currency fearing the next shoe to drop will be a EU member country calling its own IN/OUT referendum. EUR/GBP hit fresh post brexit highs above 0.8300 on heavy buying during the European session and traders suggest 0.8500 - 0.9000 being viable topside targets. The Sterling (GBP) was the main focus of sellers once again with traders selling cable aggressively through 1.3230 Friday lows to 1.3120. GBP/USD 1.3000 could provide short term support with any positive news becoming a catalyst for profit taking and bargain hunters. The GBP/JPY failed to break Friday lows and this helped to stabilize overnight at lows.
The Japanese Yen (JPY) The USD/JPY was dragged reluctantly lower as losses in European equities intensified but support at Y101.50 was solid and provides hope the worst of the move is behind us. USD/JPY 100 is a huge level and has been bantered around as the BOJ/MOF line in the sand to which intervention is more likely. The Australian Dollar (AUD) finally gave in to USD strength as OIL/USD move sharply lower to $45. AUD/USD slid below 0.7400 with support being found at 0.7320 later in the US session. The downside has been opened up for further losses here with 0.7000 a viable target in coming weeks. The RBA next Tuesday is likely to remain dovish and maybe even move early to counter any Brexit concerns. China Data on Thursday is main economic data this week.
Stocks Indices(DAX) reversed a early session rally to close down over 2% and on a weak footing albeit higher than Friday's knee jerk Brexit lows. The main source of concern seems to be the European banking sector which is already on a weak footing given the low interest rate environment. US Stocks (DOW) Was unable to shake off the negativity and fell in sympathy with FTSE and DAX but the selling was not aggressive and is still the main hope for reversal as US stocks are somewhat sheltered from the Brexit fears.
Pairs to watch
EUR/USD 1.1000 still holding for now
GBP/USD 1.3230 lows broken 1.3000 the target
Nikkei 15000 make or break
Economic Data Ahead
US June CB Consumer Confidence forecast at 93 vs. 92 previously
By Anthony Darvall (TonyD)