USDCAD Overnight Range 1.2680-1.2844                    

Expectations for a quiet trading session leading up to the UK referendum results were crushed overnight. Not surprisingly, Sterling led the way.  GBPUSD soared to 1.4840 in a stop-loss hunting rally during the ultra-thin period when New York closes and Asia opens. It retreated from the peak and proceeded to trade sideways until the European session. USDJPY rallied with Sterling rising to 104.97 from 104.37 and then drifted lower until the European open.

That’s when markets got stupid. Perhaps it was a “secret poll” showing “Remain” winning the Brexit vote; perhaps it was just a massive short Sterling squeeze, but whatever the reason, GBPUSD launched into orbit, soaring to 1.4947 from 1.4732. USDJPY behaved likewise, spiking to 105.84 from a low of 104.04.  The balance of the G10 currencies suffered a similar fate.  It should be noted, that liquidity was on the bad side of poor


Chart : Implied volatility GBPUSD nothing overnight spike

As an aside, Reuters reported that the UK’s Barclays Bank has declined to accept “stop-loss orders” from their customers.  That is a direct result of the fallout from the SNB’s decision to remove the EURCHF floor in Jan. 2015.  At that time buyers disappeared and clients were unable to grasp the concept that a “bid” was for a finite amount, usually for $5-10 million dollars. When literally billions of dollars of EURCHF stop-loss sell orders were triggered, clients never understood why their order to sell $1 million or even $50 million wasn’t filled at a price for $5 million. So Barclays response is understandable-Don’t offer the service and the problem goes away”

On the economic front, the Eurozone PMI came in slightly higher than expected (Actual52.6 vs. forecast 51.5) which is modestly EURUSD positive but not much of a factor in today’s market.  Today’s US Jobless Claims was better than forecast at 259,000 but mostly ignored due to the vote.

The Canadian dollar rallied in concert with the general US dollar weakness helped by the return of WTI oil prices to the $50.00/b area.  Domestic data is really not a factor this week.

USDCAD technical outlook.

Currency volatility due to the Brexit vote has made the intraday technicals rather useless. Nevertheless, the downtrend from last week remains intact while prices are below 1.2830 looking for a move below 1.2630-50 to extend losses to 1.2510.  A break above 1.2870 will extend gains to 1.3050.

USDCAD is in a broad 1.2500-1.3200 trading range.  A sustained break of either side would be material but until that happens, the USDCAD buy zone is in the 1.2510-50 area and the sell zone is in the 1.3120-70 area.

Todays’ Range 1.2680-1.2780

Chart: USDCAD weekly