Forex Institutional Research: Lloyds Bank FX Daily
Key quotes from the Lloyds Bank FX report:
Uncertainity Reign INto EU Summit
Following the UK’s decision to withdraw from the EU, near-term investor sentiment is likely to remain extremely febrile with constrained liquidity in some markets possibly exacerbating volatility. Near-term focus will remain dominated by the fallout of last week’s decision for the political, economic and broader EU landscape. The two-day EU leaders’ summit starting tomorrow, will now be front and centre, particularly following EU parliament President Schulz’s comments over the weekend that the UK needs to start formal proceedings to leave the EU this week. Over the coming week, the focus will almost certainly be dominated by post-referendum analysis and market reaction, again leaving economic data releases in the shade. This is likely to be the case today, particularly given the light data calendar. Advance US goods trade for May provides the only data point of note today. Following the sharp narrowing in the goods trade deficit in March, April’s data saw a widening. A further deterioration is expected for May consistent with a drag on growth in Q2
The market has stabilised after last week’s routing. Monthly channel support in the 1.3270 region is holding at the moment, with 1.2800 key Fibonacci support below there. We do believe this decline through 1.3500 is the final phase in the decline from the 2.1160 highs set back in 2007, but we have little in the way of confirmation of a base developing yet. Key resistance in this regard lies at 1.40-1.4250. A move back up through this region would alleviate a lot of the current bear pressure. Intra-day we have support around 1.3350, ahead of last week’s lows, with resistance in the 1.3610/20 region and then 1.3710/30 ahead of the key levels already mentioned.
The market has found some stability having seen important technical support in the 1.0910 region hold last week (equality and Fibonacci support). A decline through this support region suggests a move towards next important Fibonacci support in the 1.0760/50 region, with previous lows in the 1.0825 area of minor interest. To alleviate the current bear pressure we need to see a move back through key resistance in the 1.1150- 1.1250 region. We have intra-day resistance ahead of that lying at 1.1120/40. Longer-term we are getting more worried that the price action between 1.0450 and 1.17 is looking more like a classic sideways consolidation before a move to test key long-term support in the 1.00-0.99 region. We are monitoring this risk.
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