Brexit Debate Enters Hot Phase

Dear Traders,

The British pound extended its gains towards 1.48 while the euro went into a tailspin Tuesday. Sterling benefited from reduced chances of a so-called Brexit, even if Thursday’s U.K. referendum is not a foregone conclusion. We expect the pound to be highly volatile on the last day before the vote and we will not elaborate on the technical picture today as anything is possible.

The euro dropped towards 1.1235 after it rejected the 1.1350 level. In short-term timeframes we expect the 1.1310-level to act as a resistance for the euro, whereas a lower bound could be currently found at 1.1222/1.12. Above 1.1360 the euro could climb towards 1.1395 and 1.1435. Below 1.1220 we will favor a bearish stance, targeting lower levels at 1.1185 and 1.1135.

Fed chair Yellen adopted a cautious approach to the outlook and the appropriate pace of interest rate hikes in yesterday’s testimony before lawmakers in Washington. She highlighted concerns about longer-term problems in the U.S. economy, adding to signs that the Fed may go for only one hike this year. Yellen is due to address lawmakers for a second day today at 14:00 UTC, while at the same time U.S. Existing Home Sales are scheduled for release.

The Brexit debate is entering the hot phase and traders should prepare for higher volatility ahead of tomorrow’s vote. Whatever the outcome may be, we wait to be surprised and try to get the best out of the market’s movements.

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