17 June 2016 at 11:36 GMT
The Brexit campaign has been put on hold in response to the tragic murder of Jo Cox MP and it remains unclear when Britain’s shocked politicians will resume campaigning.
European equity markets have rebound from steep yesterday’s losses. On the forex market, USD, JPY and CHF were the biggest losers in yesterday’s rout.
Meanwhile, gold saw a sharp reversal from overbought conditions yesterday, falling 3% from its earlier 22-month high.
- US May Housing Starts (1.15M exp.) (1230)
- US May Building Permits (1.145M exp.) (1230)
- Canada May CPI (1230)
- ECB's Draghi to speak (1500)
Generally a relief day following yesterday’s volatile Asian and European sessions
EURUSD is back to the range that started June 10. It's interesting to see how EURUSD has failed the last four days to convincingly close below its 100-day moving average today at 1.1225. So an end of week close below this could be a nice sign for the bulls ahead of the Brexit referendum next week. The range is 1.1225 to 1.1294 with more tech resistance being the 55-day moving average at 1.1305 now USDJPY: despite market relief we're not seeing much in USDJPY as it has lost the gains from the Asian session. The downside ahead of the Brexit referendum remains the dominant factor. Technically wide between levels that can be looked at. 105.5 to 106.06 area as key tech resistance area. Tech support side also far from current levels initially starting at around the 103.40 area around highs of closings on weekly charts for Q2 20114 and Q2 2013. Main tech support area around 101.50 area (50% Fibo level from rally starting Q3 2012 to highs of 2015 on weekly charts). GBP traded higher following the tragic events in the UK and the suspension of the Brexit campaign. As the weekend is approaching it's not unthinkable that we see sudden moves due to opinion polls or unwinding before that. It's difficult today if technical levels would be respected in such an environment. Levels of interest on the last wave down starting May 26 in GBPUSD are 1.4290 (the 38% Fibo level) and the50% Fibo level. These might be levels where GBPUSD could be in check with polls being mixed or favouring Leave.
EURGBP is back hovering around the magnet of late which is the 200-week moving average at 0.7924. Note EURGBP has not closed above this level on a weekly chart since week April 18, so could remain the magnate on any drops to try and reclaim the level or on any rallies to 0.800 area. Again as with GBPUSD polls can change things very rapidly.
FX Options volatilities
In EURUSD vols have been on a big rollercoaster last 24 hours, with 1month atm yesterday from 11.5 to 13.25 and now back down to 11.5. This was move was very closely related to the move in spot, so there is a clear correlation between spot direction and how ATM vols are reacting, also known as the risk reversal effect, which is very strong these days. We should expect this RR effect to stay the same until we are over the EU referendum. JPY and AUD vols also trading a bit lower. 1w expiry has rolled to 24 June, which is why that tenor is up so much today.
Yesterday’s moves broadly unwound in European bond markets, with government bonds trading down and the 10-year German yield back in positive territory and corporate bond spreads tighter. With Brexit campaigns suspended, action is likely to be subdued towards the weekend as we await the outcome of next week’s vote.
European markets trade higher this morning following on from a strong Asian session and bounce in oil. EuroStoxx 600 trades up 1.28% on solid volume. Financial and energy stocks are outperforming whilst consumer staples are largely flat on the day.
Brexit risk has eased a little this morning allowing for the banks to be the best performers. Lloyds, Barclays and Standard Chartered are all up in excess of 4%.
TUI is up over 4% after the CEO commented in an interview that the company saw record bookings in 2016.
Siemens, the German industrial group, is expected to pay $1 billion to Gamesa in a deal to combine their wind businesses. Siemens is trading up 1.34%.
Oracle reported after the close last night, beating estimates on the strength of their cloud products. They are trading up 3.5% in pre-market session.
Mid-session Europe is part of TradingFloor's stable of commentary running through from the US close, through Asia to the European session. Click below to keep abreast of all the developments as they happen.
London is bathed in grief following yesterday's tragedy. Photo: iStock
— Edited by Clare MacCarthy and Michael McKenna