8th July 2019
An unexpectedly upbeat news that the US added 224,000 jobs in June, beating expectations of 160,000 and marking a reversal from May’s disappointing results. That means a widely-expected interest rate cut — anticipated to land at the end of this month — might not arrive until the autumn. The Federal Reserve may look at the economic data, decide it isn’t too bad, and hold their nerve.
Markets wouldn’t get the stimulus they hope for, but the Fed would maintain a greater capacity for rent cuts if the US economy hits the rocks. That’s not what Trump wants. The President wants strong economic results AND a rate cut, which would send the souped-up US markets (which have lately hit their all-time highs, after a record period of sustained growth) into uncharted territory. The danger is that by coaxing the the economy to ever-greater heights now, Trump — or potentially his successor, depending on what the next eighteen months or so hold — could be left with few cards to play if something goes wrong.
Meanwhile, the sharpest slide in German factory orders since the financial crisis ignited fears that the slowdown in Europe’s biggest economy is escalating into a more serious slump. Factory orders plunged 8.6pc year-on-year in May, the biggest annual tumble in almost a decade. They fell by 2.2pc compared with April as car makers continued to lead the decline. The shock setback for Germany’s ailing manufacturers stoked concerns that central banks will need to take action to arrest a deepening global downturn.
Iran said it would pursue nuclear talks with European nations in the coming days, while ratcheting up pressure on its partners to salvage the landmark 2015 deal by announcing it had abandoned restrictions on uranium enrichment. Deputy Foreign Minister Abbas Araghchi said his country hasn’t closed the diplomatic pathway with Europe, and that the U.S. could join talks if it removes the crushing sanctions it has imposed since quitting the accord a year ago. European powers urged Iran to reverse its latest decision. The U.K. and the European Union said they were concerned about Iran’s move to abandon uranium enrichment restrictions. Both said they’re in contact with other parties to the accord regarding next steps.
Stocks in Asia had a muted start to the week after their U.S. counterparts retreated and Treasury yields rose Friday on the strong jobs report. Futures pointed to modest declines in Japan, Hong Kong and Australia after the S&P 500 slipped on low volumes. Next up for traders comes Federal Reserve Chairman Jerome Powell’s testimony to Congress on Wednesday and Thursday. He’ll be speaking as Trump continues to try to jawbone the Fed to lower interest rates, at a time when he may be sizing up his two latest picks for Fed governor as successors to Powell. If the Fed “knew what it was doing” it would cut rates, Trump told reporters before he boarded Air Force One in Morristown, New Jersey. That’s in spite of the latest American labor report deliverings signs the economy remains on track.
FTSE 100 Trading Signals, Forecast and Prediction
The bulls tried to defend the 7540 level on Friday and we got a small climb back towards the 7570 level. However, the futures have dropped off again overnight to retest this area, and the bottom of the 10 day Raff channel at 7529 as I am writing this. If the bears were to break below this level then I am looking at the fib level at 7517 and S2 at 7505 as the next levels of note for support. Below this then the daily supports are back on the near term map, and the 25ema at 7441 and the daily coral at 7360 are worth looking out for ion the coming week.
However, if the bulls can fight back a bit today then we may well be back on for a rise towards the more significant resistance level at 7679 for this week. There is however some 2 hour resistance prior to that at 7616 for the coral and 7629 for the 100 Hull MA. I think this latter level will see an initial reaction and we may see some bearishness off that.
We have Fridays closing price at 7553 so I am expecting an initial rise form the S1 level up towards that and then maybe a dip back down. We also have the 30min coral and the 200ema at that area, as well as the daily pivot slightly higher at 7571, so the bears will be using this area as an entry area.
The bulls failed to hold above 7600 recently but will be keen to recapture that level. Movement at the moment is driven by the rhetoric about US interest rates and the US jobs news on Friday pushes back the chance of a rate cut, hence why markets dropped. Good news is bad in this case.
I wouldn’t be surprised if we see some bull Monday kick in later, provided that the 7500 area holds if tested. S&P support is down at 2895 so a way away from where we are currently, however, the bigger picture is showing resistance at 3007 and 3106 for the moment, but with the 2 hour also showing near term resistance at 3003, so a rise back towards that looks likely early this week. There is also a weak potential for the FTSE to climb towards 8500 in the long term so bear that in mind. I am thinking though that if the 7440 level holds, and the bull do start to regain the momentum, we are going to get a rise back towards 7700 or higher.
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