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Yen Gains as Stocks Decline, Pound Drops on Brexit Worries

Yen Gains as Stocks Decline, Pound Drops on Brexit Worries

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • British Pound continues to sink amid increasingly acute “Brexit” fears
  • Japanese Yen gains as Asian stock exchanges follow Wall Street lower
  • Risk aversion likely to remain as key driver for FX market price action

The British Pound underperformed in overnight trade, plunging to the lowest level in two months against the US Dollar. The move that likely reflects rising “Brexit” fears. The selloff appeared to follow on from an ORB poll released last week that showed a 55 to 45 percent preference for a UK exit from the EU and sent Sterling tumbling on Friday.

The Japanese Yen advanced as risk aversion gripped Asian financial markets, bolstering the anti-risk currency. The MSCI Asia Pacific regional benchmark index fell 1 percent, echoing Friday’s sharp drop on Wall Street. The slump in sentiment may reflect pre-positioning ahead of this week’s key event risk, with traders moving toward a more risk-neutral posture as a precaution.

Looking ahead, risk trends are probably going to remain at the forefront amid a lull in high-profile scheduled event risk. European and US stock index futures are pointing sharply lower, hinting that risk-off dynamics are likely to extend into the hours ahead. This maykeep the Yen well-supported while applying increasingly acute pressure on the sentiment-linked Australian, Canadian and New Zealand Dollars.

Track critical short-term trading levels for major currencies with the GSI indicator !

Asia Session

GMTCCYEVENTACTEXPPREV
23:50JPYBSI Large All Industry (QoQ) (2Q)-7.9--3.2
23:50JPYBSI Large Manufacturing (QoQ) (2Q)-11.1--7.9
02:00CNYIndustrial Production (YoY) (MAY)6.0%6.0%6.0%
02:00CNYIndustrial Production YTD (YoY) (MAY)5.9%5.9%5.8%
02:00CNYRetail Sales (YoY) (MAY)10.0%10.1%10.1%
02:00CNYRetail Sales YTD (YoY) (MAY)10.2%10.2%10.3%
02:00CNYFixed Assets Ex Rural YTD (YoY) (MAY)9.6%10.5%10.5%

European Session

GMTCCYEVENTEXPPREVIMPACT
07:00EURECB’s Weidmann Speaks in FrankfurtLow
08:00CHFTotal Sight Deposits (JUN 10)-493.5bLow
08:00CHFDomestic Sight Deposits (JUN 10)-418.2bLow
12:00EURECB's Hansson Speaks on QE in Estonia Parliament--Low
13:00EURECB's Nouy Speaks at EU Parliament Committee --Low
14:40EURECB’s da Silva Costa speaks in Poland Low

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EUR/USD1.11231.11981.12241.12731.12991.13481.1423
GBP/USD1.37201.40121.41341.43041.44261.45961.4888

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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