General market theme
The UK referendum is finally here and investors are sitting at the edge of their sits ahead of today’s vote since all the recent polls have revealed that the vote is too close to call. It might come down to the amount of people that decide to actually go and vote since the supporters of the Leave campaign have more incentive to voice their discontent by casting their vote while the other camp might lack the incentive to do so.
At any case today will be a significant day for the financial markets and we should take this opportunity to advise our audience to be very careful as erratic price action in the case of a surprise might disregard stops and cause excess losses should you be caught on the wrong side of a trade.
Price action highlights
The euro continued moving higher yesterday as there is more confidence that the result of the referendum will be in favor of staying in the EU and that along with recent comments from ECB President Draghi allowed the euro to reach the 1.1350 area. Today’s price action will hinge on the result of the referendum and the first exit poll will come around 10pm London time so we expect limited activity up until then but a burst of volatility as soon as the first results start coming in. To the upside the euro is capped by the 1.1420 highs while the short-term support lies at the 1.1300 and 1.1250 levels.
The cable traded sideways yesterday and only overnight it edged above its recent highs to reach the 1.4800 level but the lack of any follow-through meant that this breakout didn’t have any legs. This morning the pound is trading around the 1.4750 area and we expect price action to be limited ahead of the referendum unless we get rumors or news related to the expected result and the pound will most probably pick up momentum as the first exit polls hit the wires.
Focus of the day
There are a few important reports pending for release today but we expect investors to disregard all of them in light of the EU referendum in the UK. The release of the Eurozone PMIs from the Manufacturing and Services sectors along with the US Manufacturing PMI levels are very important indicators that we need to note down but any price action today will be driven by the Brexit vote so again we advise extreme caution and preferably opting for the safe choice to stay out of the markets for the next 24 hours.
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