Brexit Odds and Oil Speculation

February 23, 2016

Brexit Odds:
Cable closed down nearly 2% to open the week, printing the pair’s worst daily performance since as far back as 2010. With Moody’s indicating a ratings downgrade would be on the cards if Britain votes to leave the European Union, the huge risks are starting to be priced in.

This most recent fall comes on the back of increased odds of a ‘Brexit‘. The following Bloomberg chart shows the odds from some leading bookmakers compared against what it was during the Scottish referendum for reference:

Odds of a Brexit

With a little over 3 months still to go until the referendum vote for Britain to stay in the EU, the odds of leaving currently sit at around 34%… A higher number than we had during the same point during the lead up to the Scottish Independence referendum!

GBP/USD 4 Hourly:
Forex chart, GBPUSD 4 Hourly, 160223
Click on chart to see a larger view.

The Cable 4 hour chart shows price testing the January swing low after breaking out of the short term flag pattern in the direction of the major trend.

“We can see here that price opened back almost exactly where the Cameron inspired rally began. The logical nature of where price returned to makes me nervous about a full gap fill, but technicals are technicals and price always gets what it wants.”

With this idea from yesterday’s Cable chart of the day playing out the logical way, it’s interesting that the gap not filling coincided with the technical pattern of a flag breakout.

I saw some of you on Twitter took advantage of the drop!

Oil Speculation:
Some interesting quotes to come out of the International Energy Association’s medium term report surrounding Oil:

“Today’s oil market conditions do not suggest that prices can recover sharply in the immediate future.”

“Only in 2017 will we finally see oil supply and demand aligned but the enormous stocks being accumulated will act as a dampener on the pace of recovery in oil prices.”

“It is hard to see oil prices recovering significantly in the short term from the low levels prevailing.”

OIL Daily:
Commodities chart, OIL Daily, 160223
Click on chart to see a larger view.

While the chart shows Oil having bounced off its lows and also plenty of headlines talking about bottoms about in the financial media, the stark assessment from the IEA reflects the reality of the bear market we are currently firmly in the midst of.

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On the Calendar Tuesday:
EUR German Ifo Business Climate
GBP Inflation Report Hearings
CHF SNB Chairman Jordan Speaks

USD CB Consumer Confidence

Do you see opportunity trading Forex? Take advantage on your own instant $50,000 Forex demo account.

Dane Williams – @VantageFX

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