7530 support for a rise to 7603 this morning | Fed cuts 25bps as expected | BoE no changes expected | Learning

37 point dividend today with 7140 support and 7285 resistance | Trading analysis

1st August 2019

The FTSE 100 closed almost 0.8pc lower after struggling all day as the pound enjoyed a slight bounce. Banks were the biggest weight on the blue-chip index, with Lloyds Banking Group the biggest faller after it said PPI claims had hit margins. St James’s Place was the FTSE 100’s third-biggest faller, with the wealth manager missing forecasts after a drop in inflows. Shares closed down 5.66p to 984p.

European markets all rose narrowly on hopes that the US Federal Reserve would cut rates as expected.

The Fed cut, as widely expected, lowering the target range for the federal funds rate 25 basis points to 2% to 2.25%. Policy makers based their decision on global developments and “muted” inflation pressures and left the door open to further reductions. Chairman Jerome Powell said the cut was designed to “insure against downside risks” rather than signal the start of a lengthy cycle of monetary policy easing. “It’s not the beginning of a long series of rate cuts,” he said, adding: “I didn’t say it’s just one” cut. No matter how he couched it, it wasn’t going to be enough to mollify Donald Trump. “As usual, Powell let us down,” the U.S. president tweeted.

Markets Sink

Asian equity futures pointed lower after the Fed announcement, following a sharp move downward by U.S. stocks. All three major indexes fell more than 1%, with the S&P 500 dipping as much as 1.8% before paring losses to close down 1.1%. The Treasury curve flattened as short-end yields rose, driving the gap between 2- and 10-year yields to its lowest levels since March. Gold sank, the dollar gained and oil rose to its highestin more than two weeks.

Trade Talks

U.S.-China trade talks will resume in September in Washington. The Shanghai negotiations included China’s confirmation of a pledge to boost purchases of farm goods—a key U.S. demand—the White House said. Other topics included technology transfers, IP and non-tariff barriers. Tariffs or no tariffs, Chinese companies will probably show little interest in buying American corn. That’s because the jump in Chicago benchmark futures since May has wiped out the price advantage over domestic supplies, according to Yigu Info Consulting.



FTSE 100 Trading Signals, Forecast and Prediction

We dropped off nicely yesterday but it was a shame that we didn’t quite reach the 7669 level as we opened. The bears managed to test 7530 after the Fed news which is the bottom of the current range (7530 to 7730) so if we drop down to this area again, then we may well see a hold of it, as we also have a key fib here at 7523.

For today, having broken below the 7600 level we may well see a back test of that area as we have the 200ema there on the 30min chart and as such some bears will likely reenter there. It is the start of a new month so we may well see a small initial rise as some new month money flows in, before further declines if the resistance holds.

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

At midday today we have the BoE with their rate news, though no cuts or changes are expected. At 1330 we have the US initial jobless claims with 212k forecasted, versus 206k previously. At 1500 we have the US Manufacturing data out as well so will be interesting to see what that is and  if the US economy is still doing OK.

With the drop yesterday the 2 hour chart remains bearish, and the resistance has dropped down to the 7650 area, so if we were to push higher to this area the bulls might have a job on to break above this. Shorting the rallies yesterday was the right stance, and for today its probably similar. The S&P has dipped below the 3000 level for the moment, and 3018 is cementing in as 2 hour resistance as well now. For support the bottom of the Raff channels are around the 2960 level, also last nights low.

For the FTSE, if the bulls do defend a drop down to 7530 then we may be back on for more bullishness and a rise back towards, ultimately, 7708+. However there will be caution around for the moment while traders wait for the BoE so I am expecting a dip today, especially if cable starts to rise.

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