Some thoughts on Brexit and forex

Beginner Questions
1

The fearsome upheaval in the forex market is over. There will be some backing-and-filling in the pairs that suffered the biggest moves on Friday, as the market adjusts to the “new normal”. But, prices won’t be plummeting into the abyss next week, as they did on Friday.

In the coming days and weeks, the “adjustment to the new normal” should offer us some excellent trading opportunities — especially those of us who are trend-followers. A lot of carnage and chaos was created in the currency market on Friday, leaving many pairs mis-priced. Panic tends to do that to prices. As rationality returns to the market, prices will trend toward equilibrium. If we can identify those trends in timely fashion, we should be able to ride them for respectable profits. I would expect some lively participation in [I]The 3 Ducks[/I] thread, even as we head into the time of year typically referred to as “the summer doldrums”.

The big loser (or winner, depending on your point of view) on Friday was the GBP/JPY, which gave up an amazing 2,700 pips from the HIGH of the day to the LOW of the day.

Here are the daily H-L ranges, for Friday 6/24 *, for some other pairs that I watch:

EUR/USD
518 pips 


USD/JPY
810


GBP/USD
1,795


AUD/USD
351


USD/CHF
256


USD/CAD
390


EUR/JPY
1,287


EUR/GBP
720


EUR/AUD
350


EUR/CAD
352


GBP/JPY
2,703


GBP/CHF
1,630


AUD/JPY
921


NZD/JPY
860


EUR/NZD
443


NZD/USD
338


EUR/CHF
396


AUD/NZD
123

Every pair on the list above closed DOWN on the day, except USD/CHF, USD/CAD, EUR/GBP, and AUD/NZD.

[I]Finance Magnates[/I] reports that brokers weathered the storm on Friday, without suffering the sorts of problems they encountered in the SNB debacle 17 months ago. No doubt, the hikes in required margins protected them (and many of their customers).

I think the geo-political implications of this Brexit referendum are impossible to predict with any degree of certainty. Britain and Europe — and, indeed, their allies and trading partners — seem to have been served with that ancient Chinese curse, “May you live in interesting times”.

Finally, I’m amazed at the acrimony and vitriol with which parties on the two sides of the Brexit vote b!tch and scream at each other. I thought that sort of un-civil discourse was limited to my own country, where Democrats and Republicans sling mud at one another, and gun-owners and gun-haters impugn each other’s common sense and patriotism. I thought the Brits were more civilized than we, here in the colonies. Apparently, extreme polarization now characterizes all issues, in all countries.

  • I use 5 pm (New York time) Thursday as the start of the “Friday” trading day.

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2

My guess (as an immigrant in the UK, myself) is that the last sentence above is generally correct, and that the EU issue is just a rare exception to that.

I think polarization does now characterize a lot of issues, in many countries, more than it used to, anyway. All over Europe, increasing numbers of people are now voting for parties of the extreme left and right, which wouldn’t have survived at all, 30-20-10 years ago.

In Britain, in particular, the “EU issue” is one that’s been festering for over 40 years, causing frequent disagreements and a lot of frustrations.

I think the people who have been impugning each other’s common sense and patriotism [I]will[/I] actually “come back together” more smoothly than you’d expect, and that this issue - vitriolically and aggressively though it’s been debated - [I]will[/I] actually blow over, and [U]not[/U] turn into an equivalent of your “gun debates”.

Thanks for your post above. :cool:

3

I started to take the sell trade on GPB/usd but decided to stay out of it, upon review I wished I had now.

4

Don’t put the Brits on too high a pedestal. Replace the issue with something familiar to folks in the US and the Brexit process would be hard to differentiate from what we’ve been seeing here over the last X number of years in politics. Just because they may look more polite on the surface doesn’t mean things aren’t just as nasty underneath.

5

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Ted Bauman (editor of [I]The Bauman Letter[/I]), writing in [I]The Sovereign Investor Daily,[/I] gives his view of the issues animating nationalistic, anti-elite, anti-immigrant movements in the U.K. — and in the U.S.

The Collapse of Western Democracy

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