Sterling volatility intensifies

June 20, 2016

Global stocks were offered a welcome boost during trading on Monday following the narrow 44% lead in the “Bremain” camp from YouGov which bolstered expectations of a potential “Bremain” victory. It seems that the Brexit anxieties and sporadic oil price rallies have had a similar impact on global stocks with the growing “Bremain” expectations boosting sentiment consequently encouraging investors to seek riskier assets. While bulls may be commended on their ability to send most stocks higher, the mounting uncertainty and ongoing fears over the global economy should cap short term gains. Although Asian equities appreciated in the early session of Monday from the weakening Yen, prices may be poised to decline lower as investor jitters mount ahead of the vote on the 23rd. The sense of unease that continues to ripple through the financial markets should leave investors on edge which may keep stocks in a wide range until the anticipated E.U referendum vote on Thursday.

GBPUSD surges above 1.4600.

The GBPUSD spiked to fresh three week highs at 1.4620 during trading on Monday following the latest polls from YouGov that displayed a narrow 44% lead in the “Bremain” camp which bolstered expectations of a potential “Bremain” victory. With the polls constantly changing every week, it has become increasingly difficult to identify which camp is leading and such may heighten uncertainty further. Although the GBPUSD has turned somewhat bullish on the daily timeframe, the outcome on the 23rd of June may have the ability to discard the technicals. If the current bullish momentum holds and prices can stabilize above 1.4500, then 1.4650 could be a possibility. Most investors remain on high alert and such should encourage the GBPUSD to trade sporadically ahead of the vote on Thursday.

Gold balances above $1285

Gold prices surged above $1285 during trading last week as the mounting expectations over a probable Brexit encouraged investors to seek safe-haven assets such as Gold. For a period of time, Gold prices have been controlled by the growing Brexit expectations, and if speculations mount of a potential Brexit this week then Gold could be destined to trade higher towards $1308. From a technical standpoint, prices are trading above the daily 20 SMA while the MACD is trading to the upside. Previous resistance around $1285 could become a dynamic support that encourages bulls to send Gold towards $1308.

Currency spotlight - GBPJPY

The mounting Brexit developments coupled with an appreciating Yen has encouraged the GBPJPY bears to send prices to fresh yearly lows at 145.37 in June. Although prices experienced a sharp incline during trading on Monday following the narrow lead in the “Bremain” camp, the GBPJPY may be poised to decline to unforeseen levels if Thursday concludes with a “Brexit” victory. From a technical standpoint, the candlesticks are trading below the daily 20 SMA while the MACD has also crossed to the downside. Previous support around 154.00 could become a dynamic resistance which may invite another incline back down towards 150.00.

Emerging markets – Indonesia economy pressured

Sentiment towards the Indonesian economy was dealt a heavy blow during trading on Monday following the World Bank downgrading its 2016 Indonesia economic growth forecast from 2.9% to 2.4% which renewed concerns over slowing domestic growth. This downgrade comes at a time where faltering inflation levels have forced Bank Indonesia to slash interest rates for the fourth time in 2016 in an effort to jumpstart economic momentum. With stubbornly low commodity prices and ongoing global woes exposing Indonesia to downside risks, there could be a possibility that the central bank implements further stimulus measures to promote stability. Risk aversion remains rife ahead of the E.U referendum and such could leave the Jakarta Composite Index under pressure as investors scatter from riskier assets.

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