7th March 2019
The FTSE bears defended the 7200 resistance area yesterday though it was a very slow and lacklustre reaction. The failure to break above the 10 day Raff yesterday, combined with further weakness in the US markets looks like it will weigh on the FTSE 100 today. Overnight the FTSE has remained around the 7160 level but does still have support at the 7143 2hr coral line. With the weakness yesterday the bulls now need to break 7175 initially.
The Organisation for Economic Co-operation and Development (OECD) has downgraded its global growth forecast for 2019 again and warned that a no deal Brexit could be a major shock for the world economy. It predicted that weakening international trade and the sharp slowdowns in China and the eurozone will weigh on the economy in 2019. The OECD expects global growth to decline to 3.3pc, down from its November forecast of 3.5pc.
The OECD blamed dwindling business and consumer confidence, ongoing trade tensions and “high policy uncertainty” for the drop in growth. It predicted that Italy, Turkey and Argentina will contract this year and all major economies except Japan will lose momentum.
A no deal Brexit triggering a recession in the UK would cause “sizeable negative spillovers on growth in other countries” and be a “major adverse shock Europe and possibly elsewhere in the world, given that the United Kingdom is an important trading partner for many countries”, it said.
The OECD believes the UK will expand at a rate of just 0.8pc in 2019, its worst growth since the crisis, while parts of the eurozone will see an even sharper slowdown with Germany predicted to suffer growth of just 0.7pc.
OECD Chief Economist Laurence Boone warned that the global economy is “facing increasingly serious headwinds”.
“A sharper slowdown in any of the major regions could derail activity worldwide, especially if it spills over to financial markets,” he said.
U.S. equities fell to a three-week low on concern about the outlook for growth after fresh data pointed to a slowing economy before a key jobs report Friday. Energy and health-care companies led losses on the S&P 500 Index, sending the gauge toward its worst week of the year after reports showed the U.S. trade deficit widened in 2018 to a 10-year high and private companies added fewer employees than analysts forecast last month. Commodities were led lower by oil after a bigger-than-expected buildup in U.S. crude stockpiles. Government bonds rallied as investors sought out defensive assets, while the Bloomberg Dollar Spot Index rallied for a sixth session.
ECB Set to Give More Loans to Banks
European Central Bank officials are getting ready to cut their economic forecasts by enough to justify another round of loans for banks, which would help ease financial conditions on the continent. The forecasts won’t be official until President Mario Draghi unveils them after policy makers meet Thursday. The ECB is the latest central bank to respond to a slowdown that’s gripped the global economy since last year. The Federal Reserve has already put its rate-hike cycle on pause, the Bank of England has cut its economic outlook and China lowered its growth target this week.
FTSE 100 Trading Signals, Forecast and Prediction
It looks like we have a pretty tight range to start with this morning, with resistance at 7175 to start with, and support fairly close at 7145. We may see a b it of a battle this morning to see which level breaks first. If 7175 breaks then we are looking at a rise to 7212, which was yesterdays high and also once again the top of the 10 day Raff channel. Above this then the daily resistance levels that are clustered around the 7252 to 7272 area are back into play. The bulls have been slowly and steady toiling away this week and we may see a further rise as we head towards the NFP data tomorrow.
On the other had, if 7175 holds as resistance (its on the 2 hour chart so usually pretty good) then we will see a drop down to the overnight lows around the 7145 area. This is then the 2 hour coral support in play and the bulls will probably try and defend this. A break of this though and we are looking at a drop down to the 7050 level which is pretty good daily support.
The ASX200 (Australia) had a pretty muted session while Asian stocks in general were mostly lower after the US dropped yesterday. China wobbled after Huawei filed a lawsuit against the US government, while EU officials are reportedly pessimistic about reaching a Brexit breakthrough. Negotiators suspect that whatever they offer will not be enough to get Parliament to back PM May’s Brexit deal.
So, for today looking at a tight range to start with 7145 to 7175, and a break of either of those opening up 7212 and 7260ish, or 7050 on the downside. If the US remains weak again today then that may well weigh on the FTSE, coupled with cable push upwards. Good luck today!
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