EUR/USD – Big Drop After Brexit, Recovery May Be In Progress
Last night Britain decide to leave the EU, the effect this has had on the market has been dramatic with huge declines taking place the likes of which have not been seen since the CHF crash back in 2014.
The demand zone which I said to watch for an entry long ended up being broken when the results for the vote were released. Now the price has dropped the market is beginning to move higher again, whether this is because the banks are taking profits on sell trades placed before the drop or because they are placing buy trades to trap any traders who went short remains to be seen.
For now I would watch for the high marked in the image to be broken, this would indicate that near term momentum is to the upside and will give us a bias we can use to go long or short. The demand zone is also a place we want to be monitoring for an entry long but only if the high ends up being broken.
USD/JPY – Heavy Decline Due To Brexit
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USD/JPY was also affected by Britain’s decision to leave the EU.
The breakout we saw yesterday turned out to be an opportunity for the banks to place more sell trades which the inevitably did when the results from the vote were released. I think the up-move we’re seeing now is profit taking by the banks, it would make sense to secure some profits when such a large move has taken place so I think it’s likely we’ll continue to see the price fall next week.
AUD/USD – Referendum Causes Steep Drop
AUD/USD also fell a large distance because of the EU referendum.
The drop wiped out all of the gains AUD had made against the USD since the 16th June, interestingly the market stopped falling upon hitting the point where bank traders had placed buy trades previously. This could mean the up-move we are seeing now is due to the bank traders placing more buy trades using the sell orders which came into the market when the news was released. Alternately the up-move could be the banks taking profits off sell trades they placed to cause the price to fall.