$GBPUSD falling over 10 percent at the lows, hitting a 30-year low. Was the move dramatic? Yes, but it wasn't unexpected. There are a few factors traders must take into account. First, markets relied on an assumption of a no contest vote as skewed bookie odds and flawed polls proclaimed leading into yesterday's historic vote.
The bookie odds were skewed in the favor of the side baring the most money (remain), while there were far more bets of a Brexit. Then, the polls were all over the place, and some had margin of errors so high they were useless.
Secondarily, the move in the currency was so dramatic over the course of the last week. Even if markets chalked up the six-month decline in Sterling as "fear" of a Brexit, to think it is reasonable to gain all that back in a week was dangerous. Moreover, due to brokers increasing margin requirements, the market was illiquid.
I warned that the price action was becoming far too extended and markets were setting itself for a risk-off event (and I was mocked) here:
To round the night off, the S&P 500 fell over 106 points at its low to trigger the circuit breaker. Here is a chart I posted which pointed out the long-standing SPY just can't break through:
The fact that Netherlands, France and Italy now want their own referendum vote, sentiment and the lack of is not shaping up for U.S. equities.
European banks collapsed over 15 percent. Once again, here is a chart which suggested more downside was to come (and it did):
Gold had a great day with intraday gains nearing $100 as traders pile into safety. For those that still don't understand the value of gold , the pound equivalent soared on a basis as the Sterling cratered.
As Wall Street frantically buys the dip, MacroView positioned long VXX , UGL and TLT while shorting FXB SPY and FEZ.
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