Forex Market Commentary
Across the broad Brexit it starting to spook global markets. It cannot be understand that the vote is going to have a profound effect upon traders. OTC GBP options premiums surged this week as large traders started taking positions with an over-whelming bet on a fall in the GBP/USD with an "Exit" vote. We can expect wild volatility in the currency markets this week which explains why investors are already panicking and surging into USD fixed income products and gold. Significant options are being traded this week on the GBP/USD, GBP/JPY, EUR/USD and EUR/CHF all exhibiting large movement on the short side. These are the 4 main areas of contention where large currency traders expect to move in yards. Global central banks are already getting ready for this once in a generation vote in the UK. The Brexit truly has such potential as never been seen making the Lehman crisis in 2008 pale into insignificance.
It's just too close to call and emotions are heating up resulting in the tragic death of MP Jo Cox.
Small day traders watching 5 minute prices should step out of the currency markets this week because the risk / reward relationship is becoming very dangerous. Trade the aftermath and not the build -up because volatility in the currency markets can lead to large pendulum swing which can easily wipe out your spot position in seconds. It is just to dangerous scalping pips as opinions polls on the UK vote will keep changing traders moods. Trade the aftermath and not the run in. Brexit is going to be very confusing UK law makers how this plays out in the weeks ahead.
In the US the Fed is looking for further signs of strength in the economy before taking a serious look at a rate hike in July since they down-graded their growth forecast for the US economy to 2.0% from 2.2% as forecast in the March FOMC.
It's just too close to call and emotions are heating up resulting in the tragic death of MP Jo Cox.
Small day traders watching 5 minute prices should step out of the currency markets this week because the risk / reward relationship is becoming very dangerous. Trade the aftermath and not the build -up because volatility in the currency markets can lead to large pendulum swing which can easily wipe out your spot position in seconds. It is just to dangerous scalping pips as opinions polls on the UK vote will keep changing traders moods. Trade the aftermath and not the run in. Brexit is going to be very confusing UK law makers how this plays out in the weeks ahead.
In the US the Fed is looking for further signs of strength in the economy before taking a serious look at a rate hike in July since they down-graded their growth forecast for the US economy to 2.0% from 2.2% as forecast in the March FOMC.
Please turn to Bloomberg for global bond yields:
http://www.bloomberg.com/markets/rates-bonds
In my global macro analysis the major barometers I am look at for 2016 are as follows:
USDX 94.163 -0.445 -0.57%
USDX back up to the 94 mark and a Brexit can only strengthen the currency product. Longs are now in play.
EUR/USD 1.128100 +0.001495 +0.13%
EUR is about to come under pressure. Whilst the ECB will not tolerate 1.15 equally a dramatic collapse next week will not go down well with large traders betting the pair can hit the 1.08 in the aftermath of a Brexit. Shorts are in play.
GBP/USD 1.43620 +0.01045 +0.73%
300 pips down last week and back up 100 pips this week. Brexit is rattling traders and large otc option activity is betting on a push down to the 1.39 mark this week should the vote turn sour. Shorts are now in play.
10 yr US T-Notes 131.921875 -0.359375 -0.27%
Bonds steady at highs and do not look like they will drop as the global investment community will seek flight to safety next week and keep bonds bid. Market is long again.
Crude Oil 48.75 +2.01 +4.32%
Potential strength in USD will put a lid on crude oil price growth as the market consolidates at a new high in the 48-40 region. Neutral at the moment.
Gold 1298.675 +14.030 +1.09%
Gold was the big mover of the week again as global investors sought flight to safety nervous of a Brexit. whilst fundamentals do not support the current high price a Brexit will smash the 1300 level absolutely or conversely a Yes vote would dramatically sink gold.
SP500 2071.22 -6.77 -0.33%
The SP500 retreats with a lack of positive news all round and investors pile out of equities and head for bonds nin view of Brexit.
Dow 17675.16 -57.94 -0.33%
No breakout above the 18,000 but the market will not sink either. Outlook neutral.
VIX 20.10 +0.08 +0.57%
ViX has increased from 17.50 to 20.10 reflecting the recent worries over the US economy and a Brexit.
Always use your own better judgment and try to build a picture of trade logic combining both technical and fundamental understanding.
http://www.bloomberg.com/markets/rates-bonds
In my global macro analysis the major barometers I am look at for 2016 are as follows:
USDX 94.163 -0.445 -0.57%
USDX back up to the 94 mark and a Brexit can only strengthen the currency product. Longs are now in play.
EUR/USD 1.128100 +0.001495 +0.13%
EUR is about to come under pressure. Whilst the ECB will not tolerate 1.15 equally a dramatic collapse next week will not go down well with large traders betting the pair can hit the 1.08 in the aftermath of a Brexit. Shorts are in play.
GBP/USD 1.43620 +0.01045 +0.73%
300 pips down last week and back up 100 pips this week. Brexit is rattling traders and large otc option activity is betting on a push down to the 1.39 mark this week should the vote turn sour. Shorts are now in play.
10 yr US T-Notes 131.921875 -0.359375 -0.27%
Bonds steady at highs and do not look like they will drop as the global investment community will seek flight to safety next week and keep bonds bid. Market is long again.
Crude Oil 48.75 +2.01 +4.32%
Potential strength in USD will put a lid on crude oil price growth as the market consolidates at a new high in the 48-40 region. Neutral at the moment.
Gold 1298.675 +14.030 +1.09%
Gold was the big mover of the week again as global investors sought flight to safety nervous of a Brexit. whilst fundamentals do not support the current high price a Brexit will smash the 1300 level absolutely or conversely a Yes vote would dramatically sink gold.
SP500 2071.22 -6.77 -0.33%
The SP500 retreats with a lack of positive news all round and investors pile out of equities and head for bonds nin view of Brexit.
Dow 17675.16 -57.94 -0.33%
No breakout above the 18,000 but the market will not sink either. Outlook neutral.
VIX 20.10 +0.08 +0.57%
ViX has increased from 17.50 to 20.10 reflecting the recent worries over the US economy and a Brexit.
Always use your own better judgment and try to build a picture of trade logic combining both technical and fundamental understanding.
Pieter Bergli - Trader X16
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