Volatility is expected to increase over the next 24 hours in global markets as the Brexit polls will be live and markets will be itching with every increase in percentage points. So far the current book makers have decreased there odds on a leave, prompting many to start thinking that a leave is still very much possible. Certainly I still believe that given the past history of the UK polls around the elections that nothing can be ascertained from these polls at present, as those who turn out and vote are probably a lot different compared to the pollsters themselves. However, in the event of a leave the GBP could drop by as much as 10% in the ensuing chaos as markets look to exit pound positions.
On the charts the GBPUSD rushed up earlier today and touched on the resistance at 1.4773 and has so far double topped on this level. Normally this would signal a bearish trend with the technical's but given the fundamental uncertainty at play it's something that could be very dangerous to play off. In the event of a remain vote the GBP is expected to rally and resistance at 1.5228 is looking like a prime candidate to give the market time to pause. Movements lower though in the event of a leave could be very large and a push towards support at 1.3916 could be massive, but very much possible given the current market climate.
The Australian dollar is also one to watch tomorrow as if we do have a remain scenario risk appetite will jump through the roof and the market has so far been pushing it higher on the basis of a remain vote it would seem. This has also been in part to a weaker USD, but so far the UK scenario has weighed heavily on market sentiment. The rest of the week will be weak for Australia when it comes to economic data and instead it will be US data driving any further fundamental movements, but after a 'remain' vote I would anticipate that risk appetite would certainly pick up in this market again.
Looking at the current chart for the AUDUSD it's clear that there is a bullish breakout despite the average economic data at present. Currently the AUDUSD is looking to climb to resistance at 0.7592 and this level is looking very much like a ceiling for the bulls who have been a little shy in the previous month. After this level we could see a further extension to the next level at 0.7679, but the RBA would take notice of this rise higher and may look to comment in an effort to stifle the exchange rate and bring it lower to accommodate economic growth in the Australian export community.
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