Market Briefing on Thursday June 16th

At the start of the US trading session on Thursday, EUR/USD plunged to lows unseen since June 3rd, going down as low as 1.1165. June 3rd low of 1.1134 may serve as a short-term support, while if broken the next support may be seen at May 30th low of 1.1096.

After Bank of England decided to keep its benchmark rate (repo rate) and monthly monetary stimulus intact at the policy meeting, held earlier on Thursday, GBP/USD lost ground sharply to an intraday low of 1.4100. The monthly S2 (1.4086) and the weekly S1 (1.4075) may serve as short-term support levels, after the lower daily range breakout level (S4) of 1.4132 has already been broken. In case we witness a break below the low of April 4th (1.4004) in the coming weeks, this could expose the 2016 low of 1.3833.

With the Federal Reserves June policy meeting being already a history, the upcoming EU membership referendum in the UK remains the most dominant factor to cause an impact on the Foreign Exchange Market today. The latest poll by Survation revealed that 48% of UK respondents were in favor of remaining in the EU, while 52% voted for leaving the bloc. A potential Brexit could mount additional selling pressure on the Pound, due to the negative macroeconomic effects such an event could trigger – unfavorable terms of trade, lower productivity and higher risk premium.

Another disturbing fact is the record-high deficit, which the UK registered on its current account, a wider indicator measuring overall macroeconomic health and also reflecting the difference between UK savings and investment, during the first quarter of 2016. The gap was reported to have reached GBP 32.7 billion. A deficit figure implies that the nation is a net borrower to the rest of the world, as it consumes more than it produces. This way other countries should lend it their savings, which creates foreign liabilities for the net borrower (or it needs to use up its foreign currency reserves).

In its latest Monetary Policy Summary Bank of England once again expressed a strong opposition to the ”Leave” campaign. ”While consumer spending has been solid, there is growing evidence that uncertainty about the referendum is leading to delays to major economic decisions that are costly to reverse, including commercial and residential real estate transactions, car purchases, and business investment. As the Committee has previously noted, potential referendum effects are making economic data releases more difficult to interpret, and the Committee is being more cautious in drawing inferences from them than would normally be the case”, according to an extract from the BoE Statement.

USD/CAD advanced to highs unseen since June 3rd at the start of US trade on Thursday, while marking an intraday high of 1.3039. The next possible levels of resistance for the pair sit at June 3rd high of 1.3108, the daily 200-period Exponential Moving Average (1.3117) and the weekly R2 level (1.3140).

Gold futures for delivery in August remained firmly above the handle of $1,300 per troy ounce, after going up as high as $1,316.75 during the early phase of European trade, or a level unseen since August 8th 2014. A break above the current intraday high may expose the daily R3/August 8th 2014 high ($1,321.68/$1,322.10), the weekly R3 ($1,330.27) and the monthly R2 ($1,344.80) levels.