EUR/USD: Focus on Brexit vote and EUR/GBP flows

• EUR/USD posted gains in Asia as risk-on pushed EUR/JPY higher.
• Brexit vote and the resulting action in EUR/GBP could influence EUR/USD.
• The market expects the vote to be defeated by a historically large margin.
• Draghi speech, due at 15:00 GMT, could also influence the EUR pairs.

The EUR/USD volatility could rise, as the Brexit vote is expected to yield big moves in the EUR/GBP cross.

The market already expects the motion to be rejected by a historically big margin. Notably, some defeat estimates are ranging as high as 200.. The downside in Sterling (upside in EUR/GBP), however, could be limited as the historic parliamentary defeat may have been priced in.

That said, the opposition party may call early elections if the vote if defeated by a big margin, leading to heightened political uncertainty and an uptick in the EUR/GBP and EUR/USD.

Sterling, however, could rise if the vote is defeated by a margin of 50 or below. That would mean UK's PM has sufficient support to try for a second approval, according to FXStreet Analyst Joseph Trevisani. Brexit optimism will likely lift EUR/USD higher as well, although gains could be capped by the drop in EUR/GBP.

Apart from the Brexit vote, the EUR pairs could also take cues from the ECB President Draghi's speech. The common currency could pick up a strong bid if the central bank head downplays recent economic slowdown and focuses more on the wage growth.

EUR/USD Technical Levels