Brexit and the US Dollar Outlook

  • Back in position to make a run in June
  • USD outlook more constructive than priced
  • Buck stands to gain whatever the referendum outcome

GOOD POSITION - Time heals all wounds and the pain of last week's GOLD sting has now been reduced to a minor irritation. Really nice upside follow through in AUDNZD today, which has allowed me to book about 2% profit on the trade, putting me in a nice position to make a move in June and keep the streak of profitable months going. For today, the strategy will be to get back into AUDNZD after this latest sharp rally, and also look to finally add to my very small SPX500 short. 

ABOUT THE BUCK - As far as the US Dollar goes, I think everyone is getting way too bearish. It's true, last week's abysmal NFP showing has taken the wind out of sails for a June hike. But in reality, the Fed was never going to hike in June anyway given the Brexit risk. So if the first Friday in July rolls around and the employment report is once again looking solid, all of a sudden everyone will be talking July hike again. Of course, this assumes the remain vote comes through in the UK referendum. 

US Dollar stands to gain whatever the EU referendum outcome. Via @joelkruger

BREXIT AND THE USD  - But here's the kicker as far as the referendum risk goes. If the UK votes to remain, it helps along the prospect for a Fed rate hike and points to broad based Dollar demand (perhaps not against the Pound but against all other currencies). On the other hand, if we do actually get a Brexit, it's true the Fed will likely push out beyond July, but in this scenario, the US Dollar also stands to appreciate across the board, this time on the wave of uncertainty and safe haven flow. So no Brexit = USD strong, Brexit  = USD strong. As such, I think there could be good opportunities to buy the Dollar in the sessions ahead. 

Euro, Cable, Gold, US Equities

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