7086 7070 7020 6996 support | 7155 7245 resistance | Expiry today | Further Fed rate cut | Trading membership

Dust settles and a rise to 7635 on the cards | 7570 support | NFP tomorrow - buy the rumour

16th August 2019

The FTSE 100 hit a six-month low on Thursday after China warned the US had “seriously violated” the countries’ trade relations by announcing ramped-up tariffs. A temporary discount on Royal Dutch Shell shares added to the drag on the blue-chip index, which hit its lowest level since late February.

Indices turned red across Europe as investor worries about a trade conflict between the world’s two biggest economies appeared to be facing a fresh escalation.

An effort by Jeremy Corbyn to form a ‘caretaker’ government to stop a no-deal Brexit is struggling to gain traction after immediately meeting resistance from the Liberal Democrats.

Beijing Retaliates

China blasted looming U.S. tariffs of 10% on a further $300 billion of Chinese imports as a violation of accords reached by Presidents Donald Trump and Xi Jinping. In a short statement the State Council Tariff Committee said China “has no choice but to take necessary measures to retaliate.” Meanwhile Trump said a phone call with Xi was on the cards to discuss the trade war. That could give him an opportunity to expand upon his advice on how China might resolve the protests that have rocked Hong Kong for two months. “If President Xi would meet directly and personally with the protesters, there would be a happy and enlightened ending to the Hong Kong problem,” he tweeted. China, however, isn’t too keen on “foreign forces” interfering in the issue.

Another Cut

The U.S. data pouring in supports Federal Reserve Chairman Jerome Powell’s forecast of solid economic growth and higher inflation. Still, economists remain confident that Powell will cut interest rates again next month as insurance against a global slowdown. Powell may give a hint of his thinking when he speaks on Aug. 23 at the annual central bankers retreat in Jackson Hole, Wyoming. On Wednesday talk of recession reared its ugly head when a key portion of the Treasury yield curve inverted — meaning short-term rates were higher than long-term rates — which has previously provided an early warning. Fed officials, however, have consistently said they don’t see any imminent risk of recession.

FTSE 100 Trading Signals, Forecast and Prediction

We saw the bears take the FTSE down to 7020 yesterday but the bulls have fought back and if that continues today we may well see a bit of a recovery towards the 7155 resistance level. With the fib, R1 and the 200ema on the 3omin chart here, we may well see a bit of a stutter at this level. I am thinking that we may see a small initial drop today to start things off as we retrace a bit to yesterdays close price at 7067, and also the now green 30min coral for support at 7063. Its possbile we don’t drop down that low though as we have the pivot for support also at 7086 and the bulls will be keen to keep this momentum going having climbed off the 7020 level.

FTSE 100 Trading Signals, Forecast and Prediction
FTSE 100 Trading Signals, Forecast and Prediction

Should we pop below the 7020 then 7000 is the next main support, being the round number and psychologically important. One thing to bear in mind is that the ECB have pencilled in September for “measures” so this sell off could all just be part of the game to force them to deliver more than they wanted too. The Fed/Powell are also talking about another rate cut. The U.S. data pouring in supports Powell’s forecast of solid economic growth and higher inflation. However, economists remain confident that Powell will cut interest rates again next month as insurance against a global slowdown.

Should the bulls break above the 7155 resistance area today then 7170 is the 2 hour coral and then we are looking at 7250, 7305 and 7329 as the next main levels. Really wouldn’t be surprised to see a bit of a recovery today, but its Friday, in August, that has been fearful and messy, so could just as easily shed 100 again! For the moment I am looking at the 7065 level for support and 7155 7245 for resistance for todays session. Good luck today and have a great weekend.

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