It’s Monday morning, and the Brexit bloodbath continues to ravage GBP/USD, with the pair growing further apart a cool 200 pips before the wild part began.
GBP/USD 15 minute
The gap looks like nothing next to Friday’s falls and the 100 pip swings thereafter may as well not be there if you’re looking at the chart itself. Fun times.
It’s this whipsawing that highlights the lack of liquidity that has seen Vantage FX stick with some elevated margin requirements across our book so if you’re trading live with us then just a heads up to make sure that your trading account is adequately funded and that you monitor your exposure carefully through this period.
With the above market conditions still in mind, you have to keep asking yourself whether getting involved in GBP or EUR related pairs is really worth it from a risk management perspective. I’ll leave that one with you as we zoom out and take a look at the bigger picture on Cable.
It will settle down and you definitely can’t go wrong keeping up with the major levels when they come back in play.
The GFC low marked on the above weekly chart is long gone today after briefly providing some support on Friday. But that’s going to be a key level/zone (as it’s a weekly line, there is no way that it’s going to hold cleanly to the pip on both sides) for managing risk around as we head forward and things settle back into regular trading conditions.
Just keep in mind that a Brexit from the EU isn’t an overnight process. Prime Minister David Cameron has resigned in order to pave the way for a new leader to take the country to the next step following the vote. But Cameron wont actually leave until October and only then can the 2 year process of officially leaving take place. There’s a long way to go yet people!
All that means for markets, traders and people in the UK is uncertainty. So ‘settling back into regular trading conditions’ might not be a short term proposition. All we can do is wait and see.
One alternate story-line that is emerging Monday morning during the Asian session, is Yen strength following the Brexit vote.
USD/JPY took a beating on the vote too, with traders flocking to the relative safe-haven currency that is the Japanese Yen. The drop in USD/JPY was exaggerated further with the shock Brexit decision almost certainly curbing any near term interest rate hikes from the US Federal Reserve too.
USD/JPY 15 minute
This morning’s price action saw the weekend gap filled quite early on in the piece after the following headlines hit screens:
Japan PM Abe: Told FinMin (Aso) to take necessary action in FX markets, important for G7 to continue to send message to stabilise mkts
— Livesquawk (@Livesquawk) June 26, 2016
The USD/JPY price action was a typical overreaction to a headline with traders jumping on the pair expecting some sort of instant BoJ intervention that was never going to come, before realising that almost every day for the last 6 months these types of headlines have been written out of Japan.
“Things will settle down again. Just don’t do anything stupid in the meantime!”
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This is a guest post originally appeared on Vantage FX blog. Reposted with permission.