HomeContributorsFundamental AnalysisEuro Drops in Article 50 Aftermath, Yen Gains

Euro Drops in Article 50 Aftermath, Yen Gains

Trumpmania is taking a break from dominating the global media headlines as UK Prime Minister Theresa May is the talk of the town after she finally invoked Article 50, effectively providing a letter to the European Union telling Europe that the United Kingdom wants a divorce.

The financial markets from the perspective of global stocks have performed somewhat mixed on this historic day, alternating between both buying and bearish momentum but there are some signs of investors searching for safety assets with the Japanese Yen noticeably higher against its major trading partners and Gold showing more marginal gains. We have seen time and time again in recent times that the Japanese Yen becomes a trader’s best friend in times of uncertainty and depending on how stubborn the prolonged negotiations take between Theresa May and her EU counterpart, perhaps Brexit uncertainty will be viewed as another reason for investors to hedge on Gold this year after the precious metal has already gained just over $100 since the opening day of trading in 2017.

EURUSD suffers as trading progresses

While all eyes are understandably on the British Pound, it is the Euro that looks set to be a surprise contender for the loser of the currency markets today following the Eurodollar succumbed to selling pressure above 1.08 to looking at risk to slipping below 1.07. You could on one hand say that investors are pricing in the likelihood that Europe itself is going to enter its own period of uncertainty by losing a member of the European Union, while others could say that the losses in the Eurodollar represents a withdrawal of gains after spiking heavily as trading for the week commenced after President Trump was defeated in his quest at replacing Obamacare.

I personally stand by my view that the Euro is grossly oversold, or you could say underbought on an economic basis but the political risks around Europe this year does also support the bias that the Euro remains at risk especially if Marine Le Pen’s campaign to win the election in France achieves a bid.

GBPUSD encounters a tug of war

The British Pound is as you would expect where all the major action is happening, but there are signs of a somewhat tug of war taking place with the GBPUSD alternating between both buying and selling momentum after suffering late in trading yesterday and overnight.

It is no hidden secret at all that the market is short on the Sterling with short options on the Pound recently at historic levels, but traders still need to be careful and inherit appropriate risk management strategies whether that is hedging towards the Japanese Yen or whatever because it is not unknown for the market to suddenly bounce the other direction if the currency encounters a sudden squeeze.

ForexTime
ForexTimehttp://www.forextime.com/
The FXTM brand provides international brokerage services and gives access to the global currency markets, offering trading in forex, precious metals, Share CFDs, ETF CFDs and CFDs on Commodity Futures. Trading is available via the MT4 and MT5 platforms with spreads starting from just 1.3 on Standard trading accounts and from 0.1 on ECN trading accounts. Bespoke trading support and services are provided based on each client's needs and ambitions - from novices, to experienced traders and institutional investors. ForexTime Limited is regulated by the Cyprus Securities and Exchange Commission (CySEC), with license number 185/12, licensed by South Africa's FSB with FSP number 46614, and registered with the UK FCA under reference number 600475. FT Global Limited is regulated by the International Financial Services Commission (IFSC) with license numbers IFSC/60/345/TS and IFSC/60/345/APM.

Featured Analysis

Learn Forex Trading