FX Board: JPY, GBP diverge at maximum speed
The clock's ticking down towards the Brexit referendum after a bad day for sterling. Photo: iStock
By John J Hardy
Key developments in FX today:
- Sterling was pounded for heavy losses as a fresh poll suggests that the market has been too quick to brush off risks of a Brexit at the June 23 referendum, with more downside risk ahead of the vote, though the technical signals may prove unreliable due to ad hoc polling results and the unknown of the event itself. Our trending indicator for GBPUSD is already crossing over to negative today and GBPJPY will likely soon follow.
- USDJPY dropped further after a bearish reversal overnight of the latest sequence that had taken the pair to the top of the Ichimoku cloud. Most of the heavy lifing was in the JPY rather than notable USD developments. We're now trading back below the cloud in USDJPY and watching for basic retracement levels and possibly more if the US data through the end of the week disappoints. Other JPY crosses are also poised near interesting levels, notably EURJPY and GBPJPY, as mentioned below.
- The broad USD picture provided no new clues ahead of Friday's key data, as the JPY and GBP stole the focus today, though today did see the greenback recovering smartly against the commodity currencies after some pressure overnight.
Technical signals are treacherous when ad hoc news can derail or shift sentiment so quickly and the June 23 vote is the ultimate test.
EURJPY reverses course
Even if the pair doesn't stay down here due to weak US data releases, the scope of any follow up rally might prove modest.
Any AUDUSD rally is likely to be modest