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EURUSD Back at the June Open, Post-Brexit Rebound Eyes CPI for Fuel

Talking Points

EURUSD 240min

EURUSD Back at the June Open, Post-Brexit Rebound Eyes CPI for Fuel

Technical Outlook: Euro has continuedto trade within the confines of a well-defined descending median-line formation extending off the yearly high. The Brexit fallout fueled a brief break below parallel-support last week with this week’s opening range low reversing precisely off a sliding parallel extending off the 4/14 low (red). The pair has now filled the Sunday gap to complete a 61.8% extension off the Brexit low at 1.1127. Note that the monthly open comes in at 1.1129.

Heading into tomorrow’s CPI release, the focus remains weighted to the topside while above the weekly open at 1.1010 with a breach higher targeting the 50% retracement at 1.1170 and a more significant Fibonacci confluence at 1.1224/31- (area of interest for near-term exhaustion / short-entries). A break below the weekly open puts the focus back on parallel support & the 2016 open at 1.0872. Keep in mind tomorrow marks the end of the month / quarter and could fuel added volatility into the close. Continue tracking this setup and more throughout the week- Subscribe to SB Trade Deskand take advantage of the DailyFX New Subscriber Discount.

Avoid the pitfalls of near-term trading strategies by steering clear of classic mistakes. Review these principles in the “Traits of SuccessfulTraders” series.

EURUSD Back at the June Open, Post-Brexit Rebound Eyes CPI for Fuel

  • A summary of the DailyFX Speculative Sentiment Index (SSI)shows traders are net short EURUSD- the ratio stands at -1.23(45% of traders are long)-weak bullishreading
  • Yesterday the ratio was -1.14; Short positions are 8.7% higher than yesterday but 3.8%below levels seen last week
  • An extreme of -2.67 was registered just one day before the May high – Short interest has been building since the Brexit vote (brief flip to net long at the low), keeping the focus higher in Euro
  • Open interest is 5.2% higher than yesterday but 17.7% below its monthly average. Note that this build in open interest pushed SSI deeper into negative territory suggesting that these positions are new shorts being put on (as opposed to position squaring- bullish)

Help fine-tune you entries, click here to learn more about the DailyFX Grid Sight Index (GSI)

Relevant Data Releases This Week

EURUSD Back at the June Open, Post-Brexit Rebound Eyes CPI for Fuel

Other Setups in Play:

Looking for more trade ideas? Review DailyFX’s Top Trading Opportunity of 2016

—Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michaelon Twitter @MBForex contact him at mboutros@dailyfx.com or Click Here to be added to his email distribution list

Join Michael for Live Scalping Webinars on Mondays on DailyFX and Tuesday, Wednesday & Thursday’s on SB Trade Desk at 12:30 GMT (8:30ET)

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EUR/USD Back at the June Open, Post-Brexit Rebound Eyes CPI for Fuel

Talking Points

EURUSD 240min

EUR/USD Back at the June Open, Post-Brexit Rebound Eyes CPI for Fuel

Chart Created Using FXCM Marketscope 2.0

Technical Outlook: Euro has continuedto trade within the confines of a well-defined descending median-line formation extending off the yearly high. The Brexit fallout fueled a brief break below parallel-support last week with this week’s opening range low reversing precisely off a sliding parallel extending off the 4/14 low (red). The pair has now filled the Sunday gap to complete a 61.8% extension off the Brexit low at 1.1127. Note that the monthly open comes in at 1.1129.

Heading into tomorrow’s CPI release, the focus remains weighted to the topside while above the weekly open at 1.1010 with a breach higher targeting the 50% retracement at 1.1170 and a more significant Fibonacci confluence at 1.1224/31- (area of interest for near-term exhaustion / short-entries). A break below the weekly open puts the focus back on parallel support & the 2016 open at 1.0872. Keep in mind tomorrow marks the end of the month / quarter and could fuel added volatility into the close. Continue tracking this setup and more throughout the week- Subscribe to SB Trade Deskand take advantage of the DailyFX New Subscriber Discount.

Avoid the pitfalls of near-term trading strategies by steering clear of classic mistakes. Review these principles in the “Traits of SuccessfulTraders” series.

EUR/USD Back at the June Open, Post-Brexit Rebound Eyes CPI for Fuel

  • A summary of the DailyFX Speculative Sentiment Index (SSI)shows traders are net short EURUSD- the ratio stands at -1.23(45% of traders are long)-weak bullishreading
  • Yesterday the ratio was -1.14; Short positions are 8.7% higher than yesterday but 3.8%below levels seen last week
  • An extreme of -2.67 was registered just one day before the May high – Short interest has been building since the Brexit vote (brief flip to net long at the low), keeping the focus higher in Euro
  • Open interest is 5.2% higher than yesterday but 17.7% below its monthly average. Note that this build in open interest pushed SSI deeper into negative territory suggesting that these positions are new shorts being put on (as opposed to position squaring- bullish)

Help fine-tune you entries, click here to learn more about the DailyFX Grid Sight Index (GSI)

Relevant Data Releases This Week

EUR/USD Back at the June Open, Post-Brexit Rebound Eyes CPI for Fuel

Other Setups in Play:

Looking for more trade ideas? Review DailyFX’s Top Trading Opportunity of 2016

—Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michaelon Twitter @MBForex contact him at mboutros@dailyfx.com or Click Here to be added to his email distribution list

Join Michael for Live Scalping Webinars on Mondays on DailyFX and Tuesday, Wednesday & Thursday’s on SB Trade Desk at 12:30 GMT (8:30ET)

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European Equities Continue to Lag Behind U.K. in Post-Brexit Bounce

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Talking Points:

- A continued bounce in GBP and Equities is bringing the world back from the ledge after last week’s Brexit referendum.

- While recoveries are being seen in many markets, deviations and indications through price action may be highlighting a pertinent theme, as European equity has been and continued to be weaker than those from the U.K.

- If you’re looking for trading ideas, check out our Trading Guides. And if you want something more short-term in nature, check out our SSI indicator. If you’re looking for an even shorter-term indicator, check out our recently-unveiled GSI indicator.

On the fourth day after Brexit, many global equity markets continued to their post-Brexit bounce higher with notable gains being seen in Asia. However, one of the more interesting observations is the fact that European bourses have continued to lag behind those from the U.K., and much the rest of the world for that matter. On the chart below, we’re looking at the UK100 (FTSE100) against the Euro Stoxx 50 index.

European Equities Continue to Lag Behind U.K. in Post-Brexit Bounce

Created with Marketscope/Trading Station II; prepared by James Stanley

This raises the very legitimate question as to whether a Brexit scenario may bear more risk moving forward for the U.K., or the European Union that they’re choosing to leave behind. I say a ‘Brexit scenario’ because there isn’t much certainty around the negotiations to actually execute Brexit, as most signs are currently pointing to the prospect of having to wait for Article 50 to be formally triggered until after a new Prime Minister is chosen. Mr. Cameron had previously mentioned stepping down in October, and with the Conservative Party leadership election expected to take place in September, it seems this is a likely period to begin expecting that leadership transition. After a new leader is chosen to head the Conservative party, they’ll assume role of Prime Minister at which point it’s widely expected that Article 50 will be triggered and discussions around disintegration may continue. But even this is uncertain, as British Politics have seen a noticeable uptick in volatility after the Brexit referendum.

Since the Brexit referendum, we’ve seen the FTSE100 make back 85% of the losses since last Thursday’s European Close:

European Equities Continue to Lag Behind U.K. in Post-Brexit Bounce

Created with Marketscope/Trading Station II; prepared by James Stanley

Meanwhile, the DAX sold off more than the FTSE around Brexit, moving lower by -11.5%; and the recovery has been far shallower as German equities have only moved higher by 4.8% off of the Friday lows; which amounts to approximately 37.3% of that Brexit move being retraced.

European Equities Continue to Lag Behind U.K. in Post-Brexit Bounce

Created with Marketscope/Trading Station II; prepared by James Stanley

While Spanish equities have staged a healthy recover from the Post-Brexit lows, the raw movement around the referendum was quite a bit deeper than what was seen in UK stocks, as the IBEX (ESP35) sold off by approximately -17.3% from the Thursday high to the Friday low:

European Equities Continue to Lag Behind U.K. in Post-Brexit Bounce

Created with Marketscope/Trading Station II; prepared by James Stanley

French stocks also staged a deeper dive lower than the FTSE100 and has staged a shallower recovery, seeing approximately 45.6% of the ‘Brexit loss’ erased since last Friday’s low.

European Equities Continue to Lag Behind U.K. in Post-Brexit Bounce

Created with Marketscope/Trading Station II; prepared by James Stanley

What Does This Mean?

Markets are rarely completely random. While chaotic in the short-term, markets are relatively well-efficient with proper scope in the fact that information is going to be priced-in fairly quickly, and the ‘big’ players in the market that push considerable volume are rarely, if ever, going to pass up an opportunity to take advantage of inefficiency. This is why arbitrage does not exist for most of us. The fact that U.K. equities as seen through the FTSE100 moved down by less, and have recovered more sharply highlights the fact that Brexit may, in fact, be far more bearish for the European economy than the U.K.. And while we’re still in the very early stages of the ‘Post-Brexit bounce,’ this indication may be telling us something important.

One area for traders to continue watching the further development of this theme is in the EUR/GBP. The pair put in a meteoric jump around the results of the Brexit referendum, running into the 50% Fibonacci retracement of the 2009 high to the 2015 low. Should investors continue pricing-in a greater degree of risk for the European economy as opposed to the U.K., we could see the EUR/GBP down-trend coming back into markets. The level of .8100 could be especially attractive, as this is near the Friday close before this weekend’s gap, which remains unfilled at this point.

European Equities Continue to Lag Behind U.K. in Post-Brexit Bounce

Created with Marketscope/Trading Station II; prepared by James Stanley

— Written by James Stanley, Analyst for DailyFX.com

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Contact and follow James on Twitter: @JStanleyFX

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Brexit Aftermath Analysis Directory

The UK has opted to leave the European Union, triggering record-breaking volatility across global financial markets.The British Pound registered the largest one-day drop on record against the US Dollar. Risk appetite collapsed, with the benchmark S&P 500 index plunging as US Treasury bond yields fell by the most since 1998. The anti-risk Japanese Yen and US Dollar soared against their G10 FX counterparts and gold touched a two-year high.

How did it happen? What’s next for the UK, the British Pound, and financial markets at large? See the full collection of DailyFX content on this historic event and its aftermath below.

With volatility on the rise, it’s necessary to review risk management principles. We’ve outlined a few after examining what the most successful traders are doing consistently – this is what we found.

Brexit Aftermath: Where to Now?

EU Council Pressures UK to Depart Swiftly Post “Brexit’ Turbulence – 06/29/2016

Strategy Video: Wading Back into Pound Trading Post-Brexit – 06/29/2016

Part 1: Building a Post-Brexit Trading Plan – 06/27/2016

Part 2: Gold and Yen May Continue to Shine in Post-Brexit World – 06/27/2016

Crude Oil, Gold Prices Aim in Opposite Directions After Brexit Jolt – 06/27/2016

Anti-EU Sentiment in Brexit to Hang Over Weekend Spanish Election – 06/25/2016

Trading Video: Trading After Brexit Rife with Opportunity…Risk – 06/25/2016

Strategy Video: Has Brexit Finally Tipped Global Risk Aversion – 06/25/2016

Brexit Bloodbath Has Markets Betting on Lasting Volatility Risk – 06/24/2016

Market Outlook: Post-Brexit

GBP/USD Driving Equities and Volatility, Likely to Persist – 06/28/2016

Equities Vulnerable as the World Enters a Post-Brexit Reality – 06/27/2016

Realization of Brexit is a Potential Nightmare for the Euro – 06/26/2016

US Dollar Soars on Brexit, Safety and Reserve Appetite Strong Winds – 06/25/2016

Brexit Leaves Room for Even Weaker Yuan – 06/24/2016

Global Markets Brace for Massive Impact from Brexit – 06/24/2016

British Pound to Remain Volatile as the World Adjusts to the Realities of Brexit – 06/24/2016

USD/JPY Bearish Outlook Mired by Intervention Threat, Upbeat US Data – 06/24/2016

Brexit Leaves Room for Even Weaker Yuan – 06/24/2016

Brexit Vote – Initial Reactions

World Leaders Sound Off on Brexit as Markets Digest Volatility- 06/24/2016

European Market Reactions as London Opens Post “Brexit” Decision– 06/24/2016

Chaos in the Markets as UK Votes to “Brexit” From the EU – 06/24/2016

UK Votes for Brexit – Markets Highly Volatile – Caution Advised – 06/24/2016

Technical Analysis

The Brexit Aftermath – Technical Outlook into the Month/Quarter Close – 06/27/2016

Brexit Vote Generates Extreme Moves from Pound, Dollar, Markets – 06/25/2016

GBPUSD, EURUSD & Gold Technical Outlook in a Post Brexit World – 06/24/2016

CAC 40 Dives on Open – 06/24/2016

USD/JPY Retail Sentiment Moves Back to Extreme With Japan Watching FX – 06/24/2016

USD/JPY Technical Analysis: Brexit Brings A Break Below 100 - 06/24/2016

How did we get here? See our pre-Brexit analysis directory.

Brexit Aftermath Analysis DirectoryBrexit Aftermath Analysis Directory

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All Quiet on the Western Front as GBP/USD Guides Equities Higher

Talking Points:

- GBP/USD perks up through $1.3400, pulling DAX and SPX500 up.

- New regime in precious metals as shift in sentiment does little to reduce recent luster.

- FX volatility is set to remain high – it’s the right time to review risk management principles to protect your capital.

More rabble rousing in the British Parliament on Tuesday (outgoing Tory PM David Cameron said to Labour leader-in-crisis Jeremy Corbyn, “for heaven’s sake, man, go,’ in a call for him to resign) but thus far there are no real implications for markets. Nor has PM Cameron in his question session revealed much new information:; the government, under Cameron’s guidance, will not change its approach towards the fiscal surplus spending rule (keeping the country under the cloud of austerity); and the Cameron-led government will continue to take a harsh stance on the economic repercussions of the Brexit vote.

The sobering reality is that there won’t be any movement on the Brexit front until the Conservative party conference in September, at which point a new Tory leader will be elected. Given the magnitude of power the new PM will have – the ability to trigger Article 50 (or not) – there is likely a vote of confidence and perhaps a general election in the pipeline for late-Q3’16 or early-Q4’16.

Don’t expect European Union officials – particularly heads of state – to say much on the issues until then. German Chancellor Merkel, French President Hollande, and Italian Prime Minister Renzi all made clear that informal discussions on Brexit would not occur; that it was only in Britain’s power to trigger Article 50. If there’s a strategy from EU brass, it mind as well be ‘keep quiet on the Western front.’ All’s quiet indeed (though expect Italian PM Renzi to try and use Brexit as cover for help for the flailing Italian banking sector).

If there is any hope that a Brexit never actually comes to fruition, this is a savvy political move. Outside interference – loss of national sovereignty – was a significant platform point for the ‘Leave’ campaign. If the UK’s internal political process plays out in such a manner that a general election mandate supercedes the referendum, then maybe all this concern is for naught. Any talk by European officials that alludes to disrespecting the democratic will of the British people will surely strengthen the Brexit case, which in and of itself is a catalyst for more volatility.

Read more: GBP/USD Driving Equities and Volatility, Likely to Persist

How does Brexit impact the Euro? Read our Weekly Trading Forecast, “Realization of Brexit is a Potential Nightmare for the Euro”

— Written by Christopher Vecchio, Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

FX volatility is set to remain high with the UK voting to leave the EU – it’s the right time to review risk management principles to protect your capital.

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China’s Market News: PBOC Unleased FX Committee for Daily Fixing

This daily digest focuses on market sentiment, new developments in China’s foreign exchange policy, changes in financial market regulations and Chinese-language economic coverage in order to keep DailyFX readers up-to-date on news typically covered only in Chinese-language sources.

- The PBOC guided the Yuan 1,202 pips stronger against the Pound on June 28th following yesterday’s aggressive move.

- The Central Bank launched the Chinese FX Committee, a self-disciplined mechanism for daily reference rates.

- In the first five months of 2016, the revenue of China’s SOEs fell -0.6% compared to a year prior.

To receive reports from this analyst,sign up for Renee Mu’ distribution list.

Hexun News: Chinese leading online media of financial news.

- The PBOC continued to fix the onshore Yuan stronger against the Pound on June 28th on the back of the Brexit decision; the GBP/CNY was moved lower by 1,202 pips to 8.7992. On the other hand, the Central Bank fixed the Yuan 153 pips weaker against the US Dollar to 6.6528, a new low since December 2010. The Central Bank commented on the recent moves in Yuan rates and said that following the Brexit decision, the Yuan has seen depreciation against the US Dollar, but the Yuan maintained relatively stable to a basket of currencies.

PBOC News: China’s Central Bank

- The PBOC launched the Chinese FX Committee, a market coordination mechanism on June 27th. According to the Guidelines, the Committee is in charge of setting self-disciplined rules for the Yuan’s daily reference rates, as well as for trading in China’s FX interbank and client markets. The Committee includes representatives of interbank FX market participants and will promote fair-play competition, the orderly operation and healthy development of the FX market. This means that the Central Bank gives market participants more power over the Yuan reference rates.

The FX Committee is similar to the self-disciplined mechanism on interbank interest rates, which was set up on September 24th, 2013. Introducing self-disciplined mechanisms is considered as major steps that China is making to promote market-driven rates.

- The Central Bank issued the 2016 Financial Stability Report on June 27th. The regulator emphasized the safety of the equity trading mechanism and said they will remain prudent regarding the ‘T+0’ same-day turnaround model. When China’s A-shares were first introduced in the 1990’s, the Chinese equity market adopted the ‘T+0’ model. However, because of increased speculation, Chinese stocks were halted in trading and then the ‘T+1’ system was implemented in 1995 and has been used ever since.

In terms of the Chinese Yuan, the Central Bank said that they will continue to promote the currency to be convertible in a broader scope. Also, they will increase QDII and QFII quota over the following periods and may eventually remove the quota restriction.

China’s Ministry of Finance

- The revenue and profits of state-owned enterprises (SOEs) continued to drop in May. In the first five months of 2016, the total revenue of all SOEs fell -0.6% to 17.1598 trillion Yuan. Specifically, the SOEs led by the central government dropped -1.7% to 10.3988 trillion yuan while the SOEs led by the local governments rose 1.2% to 6.7610 trillion yuan. In terms of industries, coal, steel and non-ferrous metal sectors lost the most. Transportation, real-estate construction as well as pharmaceutical companies had the largest gains from January to May.

SAFE News: China’s foreign exchange regulator.

- The income collected from exporting goods and services increased to 1.2712 trillion yuan ($194.6 billion) in May from 1.2099 trillion yuan ($186.8 billion) in April. Over the same period, the payment for importing overseas goods and services rose to 1.0822 trillion yuan ($1.657 billion) from 1.0538 trillion yuan ($162.7 billion). The net surplus in goods and services increased to 189 billion yuan ($28.9 billion) in May from the 156.1 billion yuan ($24.1 billion) in April.

Written by Renee Mu, DailyFX Research Team

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