7420 7472 resistance | 7374 7365 7320 support | Brexit delayed till Halloween | Spooky | live trading room

FTSE 100 Outlook and live trading | 7191 7242 resistance | UK GDP contracts | 7120 7096 support

11th April 2019

The UK economy defied the Brexit chaos and the eurozone’s woes to maintain steady growth in February. Growth in the three months to February held at 0.3pc, driven by the services sector brushing aside mounting Brexit uncertainty.

Economists had feared that the turmoil in Westminster would bring the economy to a standstill in February. Monthly GDP growth slowed from January’s two-year high to 0.2pc but beat expectations, boosted by rebounds in the construction and manufacturing sectors.

The global economy is highly vulnerable to a debt crisis as dangerous levels of business and government borrowing could crush growth and exacerbate any slump, the International Monetary Fund has warned. Record corporate borrowing in the US could turn boom into bust in the world’s largest economy. Risky links between banks and governments in the eurozone threaten to restart the sovereign debt crisis. This is a particular risk in Italy where government debt is still rising and its banking sector is weak.

Pound rises after delay

The pound edged up on Thursday in Asia after Britain and its EU partners agreed to once again extend the deadline for Brexit, days before the cut-off for avoiding an economically calamitous no-deal divorce.

After hours of late-night talks Prime Minister Theresa May was given until the end of October to pass her deal for leaving the bloc through parliament, having failed three times already. The extension allows for an earlier exit if Mrs May achieves it, with a review taking place on June 21.

News of the delay allowed traders to breathe a sigh of relief and the pound edged up against the dollar and euro, though the gains were limited with the agreement merely kicking the can down the road. And there remains much uncertainty, with the prime minister under intense pressure from hardline Tory Brexit supporters not to compromise in her talks with Labour party, and the discussions are moving slowly. Asian equity markets fell, with few catalysts to drive buying and investors still on edge over a brewing trade battle between the United States and Europe.

White House threats this week to hammer $11 billion worth of EU goods with tariffs jolted markets, which have been rallying this year on optimism that China and the US were close to ending their own battle.

Brexit Delayed

EU leaders have reached a compromise deal to extend the Brexit deadline to the end of October with a review in June. That deadline means the U.K. leaves Europe before the next EU Commission takes office, limiting London’s entanglement in the next phase of European business. But it’s longer than Theresa May wanted and there’s a risk she faces a backlash when she takes the deal home. It also potentially sets up a political crisis in the U.K. for later this year. As most European Union leaders sought to gently maneuver the U.K. into postponing Brexit at their meeting in Brussels, only one broke ranks — French President Emmanuel Macron.

Stocks Rebound

The S&P 500 rebounded from its first loss in nine days, while Treasuries held gains after Federal Reserve meeting minutes confirmed the central bank’s dovish tilt on policy this year. Tech shares paced the advance, boosting the Nasdaq indexes. Boeing continued its slide in the wake of the 737 Max fallout, helping to hold down the Dow Jones Industrial Average. The dollar slid against the euro after European Central Bank President Mario Draghi reiterated warnings that global risks continue to batter the region’s economy as the ECB signaled no rate hikes for the rest of 2019. The pound advanced as European Union leaders met in Brussels to hash out the terms of a Brexit delay.

Fed Flexibility

Federal Reserve officials signaled on Wednesday they’re prepared to move interest rates higher or lower as needed, but an unusual mix of risks means they could remain on hold all year. Despite an economy that is forecast to grow above trend with low unemployment, policy makers are worried about external drags such as slowing European growth, the potential of a disruptive Brexit and the ongoing Trump trade war. Domestically, they are concerned about an inflation rate that is decelerating despite a labor market that is below their estimates of full employment. The result is an interest-rate policy that is on hold and might remain so even if some of these risks resolve into a more optimistic outlook. That’s basically the message in the minutes of the Federal Open Market Committee’s March 19-20 policy meeting released in Washington.

FTSE 100 Trading Signals, Forecast and Prediction

EU leaders have reached a compromise deal to extend the Brexit deadline to the end of October with a review in June. That deadline means the U.K. leaves Europe before the next EU Commission takes office, limiting London’s entanglement in the next phase of European business. With the pound rising on the news and in Asia today, the FTSE100 has dropped off its recent highs and is trying to defend the 7400 level first thing this morning. Really wouldn’t be surprised if we have another referendum in the summer after the June review.

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

We may well have a dip and rise day and I am looking at the 7374 fib level support, with the daily support at 7367 below that. I have put a long in the plan off this level, with the stop just below the S3 level for today which is at 7357. It’s a bit wide so maybe do lower stakes initially, and if it bounces add some more in.

That said, I think we will see an initial rise at the open or just before as the bulls defend the 7400 level and the bottom of the 10 day Raff here. If so then a gap close to yesterdays closing price at 7421 looks possible, but we also have some resistance of note around here now. Namely, the 200ema at 7417 and then the daily pivot at 7420. As such if we do get an initial climb to this area we may then see the drop from here.

Above the 7420 level I am still looking at resistance at the 7450 level where we have the 2 hour coral which has now gone red. Above this then the 7483 level is still resistance, and while I don’t think we will see this today, if we did then it still looks a viable short. I thought we might have tested that area yesterday but it turned into a very flat session for the FTSE in the end. Brexit and then the Fed kept the lid on any major moves.

If the bears were to break below the S3 level of 7357 today then we are looking at the next support level of 7340, but more likely a test of the daily support at 7315. It feels like the bulls might struggle to get the 7526 level now, but if they do, I am thinking that this may mark the top and is a decent level for a short as well.

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