Cable Bounces in Razor Thin Trade

June 17, 2016

Image: Scott Feldstein, Flikr (cc)

Razor thin liquidity and a sad day for democracy saw forex and equity markets recover some of their losses overnight.

GBP/USD Hourly:
160617_gbpusd_hourly
Click on chart to see a larger view.

Cable received a kick overnight as the coward act could be interpreted by voters as being stay campaign positive… How, I don’t really get or care to go into. Talking about Jo Cox’s death in terms of markets just doesn’t feel right and the British political spectrum agree, suspending campaigning for the day.

The Bank of England was the market’s feature presentation for the evening, with not only the official bank rate decision and monetary policy summary, but also Governor Carney making headlines by publicly clashing with the ‘vote leave’ campaign over the role of a public figure such as himself in swaying public opinion.

Honestly, what is Carney supposed to say about the Brexit referendum’s impact on the economy and monetary policy surrounding it. Of course the Bank of England is independent and so is Mark Carney. It is very much his duty as Governor to express the risks of leaving the European Union. News cycle politics at its finest from the leave campaign.

With the bank rate decision and accompanying monetary policy summary statement overnight, things went as expected a week out from a major referendum that could change the economic landscape of the region forever.

The bank rate was left on hold at 0.50%, the MPC official bank rate votes were 0-0-9 (increase-decrease-hold) and the accompanying statement simply emphasised the main economic risks that a Brexit would pose to the economy.

“The outcome of the referendum continues to be the largest immediate risk facing UK financial markets, and possibly also global financial markets.”

etc, etc.

Just another day in political headline paradise then!

Chart of the Day:
Along with the obvious that we touched on above, there are also plenty of headlines and quotes from analysts buzzing around today which are drawing a link between the rebound in equities and a re-evaluation of Brexit betting odds with the remain camp shortening across bookmakers and betting exchanges alike.

But with poll after poll continuing to see the ‘undecideds’ seep across into the Brexit camp, this is just plain old low liquidity chop. Beware the impending rejection.

S&P 500 Weekly:
160617_sp500_weekly
Click on chart to see a larger view.

S&P 500 4 Hour:
160617_sp500_4hour
Click on chart to see a larger view.

With the weekly chart in for higher time frame context, the zoomed in 4 hour chart shows that the higher time frame trend line resistance level is being respected on both sides of the market. This is consistent with the way we continue to discuss higher time frame trend lines being more of a ‘zone’ than a hard level due to a trend line’s subjective nature when it comes to how it can be drawn.

Anyway, some fun facts worth sharing to wrap up:

“US stocks rebounded, with the S&P 500 Index halting its largest decline since February.”

“The 5th time in 2016 the benchmark has erased a 1% intra-day drop to finish higher.”

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On the Calendar Friday:
CAD Core CPI m/m
USD Building Permits
EUR ECB President Draghi Speaks

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Dane Williams – @VantageFX

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