Asia ex Japan rallies Fed rate hike by July odds half 6265 resistance 6150 support

Support 6224 6217 6211 6198 6150 6146
Resistance 6266 6303 6316 6321 6357
Good morning I hope you had a good weekend. Well the NFP on Friday managed to throw the cat amongst the pigeons as per usual with a rather poor 38k figure, which immediate saw markets tumble. However, as is often the way the initial reaction was short lived and the FTSE (and others) rallied back, from the 6170 low to end the week around the 6240 area. Its actually stayed around there overnight as well, even though the latest polls are still showing the leave camp in the lead with the Brexit vote. The rally was of course due to the expectation that the Fed now won’t raise rates in July, despite overtures recently that June or July would see a rate hike. As expected Friday was choppy, though the dip down to the 100 Hull MA on the 2 hour (despite overshooting) didn’t give the best entry, the rally back means the 2 hour chart is still bullish for the time being.

US & Asia Overnight from Bloomberg

  • Odds of a Fed rate hike by July halved after U.S. jobs data
  • Sterling slides after new polls show Brexit support growing

Stocks in Asia excluding Japan rallied with oil and industrial metals after U.S. jobs data crushed speculation the Federal Reserve will raise interest rates by July. The pound slumped and U.K. equity index futures gained following polls that showed Britons favor exiting the European Union.

The MSCI Asia Pacific excluding Japan Index climbed to a one-month high. The Bloomberg Commodity Index advanced to levels last seen in October as crude traded near $49 a barrel and zinc rose for an eighth day. Malaysia’s ringgit and Indonesia’s rupiah were the best performers among 31 major currencies, after the Bloomberg Dollar Spot Index tumbled on Friday by the most since February, and the pound sank to a three-week low. Sovereign debt gained across most of Asia, extending a global rally that’s driven yields to a record low.

The U.S. economy created the fewest jobs last month in almost six years, data showed Friday, and the odds of the Fed raising interest rates by July halved to 27 percent in the futures market. While reduced prospects of a rate hike are giving a lift to dollar-denominated commodities and assets in developing nations, gains are tentative ahead of the U.K.’s June 23 referendum on EU membership. Institutions including the International Monetary Fund have warned of dire fallout if Britain votes to exit.

“I don’t want to sound scary, but the market isn’t prepared for” so-called Brexit, said Nader Naeimi at AMP Capital Investors Ltd. in Sydney, a company that oversees more than $110 billion. He’s been buying futures contracts on European and U.S. equity volatility, even as he forecasts voters will choose to stay in the EU. “It makes sense to buy some protection. Fear, worry and volatility are likely to intensify as we get closer,” he said.

Fed Chair Janet Yellen may give investors some clues to her thinking about the economy when she speaks Monday in Philadelphia ahead of the central bank’s mid-month policy review. Boston Fed chief Eric Rosengren will talk earlier in Helsinki and U.S. officials including Treasury Secretary Jacob Lew are in Beijing for a two-day bilateral economic summit with Chinese counterparts. A gauge of retail activity in the euro area is scheduled for release, while Germany will report on April factory orders. Financial markets in New Zealand, Sweden and South Korea are closed for holidays.

Stocks
The MSCI Asia Pacific excluding Japan Index climbed 0.7 percent as of 1:55 p.m. Tokyo time, led by raw-materials producers. Newcrest Mining Ltd., Australia’s largest gold producer, jumped 13 percent in Sydney and BHP Billiton Ltd. surged more than 4 percent.

The Topix fell as much as 1.9 percent, before recouping more than half of its loss as the yen retreated from a one-month high.

Futures on the U.K.’s FTSE 100 Index added 0.6 percent, while S&P 500 contracts were little changed.

Commodities
West Texas Intermediate crude added 1 percent to $49.11 a barrel, after falling 1.4 percent last week as OPEC refrained from freezing output at a meeting in Vienna. The global oil surplus is shrinking faster than expected and has the potential to send prices as high as $60 a barrel this year, according to Ali Majed Al Mansoori, chairman of the Abu Dhabi Department of Economic Development.

Zinc climbed as much as 1.6 percent in London to its highest level since July 2015, buoyed by speculation that mine supply cuts will lead to a worsening deficit. Nickel and tin gained more than 1 percent and copper rose 0.8 percent.

Iron-ore futures in Dalian climbed 5.2 percent after the first decline in Chinese port inventories in three weeks. Stockpiles fell 0.4 percent last week to 100.25 million metric tons, according to data compiled by Shanghai Steelhome Information Technology Co.

Currencies
The pound dropped as much as 1.1 percent versus the dollar after an ITV opinion poll found 45 percent of Britons backed the ‘Leave’ campaign, compared with the 41 percent who were for ‘Remain.’ The numbers were 43 percent for ‘Leave’ and 41 percent for ‘Remain’ in a TNS survey.

“If there’s any one other currency investors may want to go short on besides paring long dollar positions that would be sterling,” said Vishnu Varathan, a Singapore-based economist at Mizuho Bank Ltd. “There’s a binary event risk of much greater proportions than just a policy move. Sterling very much remains on the backfoot.”

The Bloomberg Dollar Spot Index was up 0.3 percent, after tumbling 1.5 percent in the last session following the U.S. jobs report. Payrolls climbed by 38,000 in May, less than the most pessimistic estimate in a Bloomberg survey.

The yen weakened 0.5 percent versus the greenback, after a 2.2 percent surge on Friday that marked its biggest gain since April. The Australian and New Zealand dollars were down 0.5 percent and 0.6 percent, respectively, after surging by about 2 percent on Friday. The ringgit strengthened 1.1 percent, its biggest gain since March, and the rupiah rose 1.2 percent. The U.S. employment data came out after most Asian markets had closed last week.China’s yuan fell to its lowest level against a basket of peers since November 2014 after the central bank strengthened the fixing by less than expected following a slump in the dollar. The currency was 0.2 percent weaker versus the dollar in Shanghai, after jumping 0.7 percent on Friday. The People’s Bank of China strengthened its reference rate by 0.5 percent.

“It seems to me that the Chinese authorities still have a weakening bias in the currency,” said Zhou Hao, a Singapore-based economist at Commerzbank AG, who had predicted the fixing would be 1 percent stronger.

Bonds
Government bonds rose in Asia, extending a rally that drove global yields to a record low at the end of last week.

The yield on the Bloomberg Global Developed Sovereign Bond Index dropped to 0.62 percent on Friday, the least in data going back to 2010. Australia’s 10-year yield fell to an all-time low of 2.16 percent. Japan’s slid to negative 0.12 percent, approaching the record minus 0.135 percent. Treasuries were little changed Monday after yields slid the most in four months on Friday. [Bloomberg]

FTSE 100 Outlook and Prediction

FTSE 100 Prediction
FTSE 100 Prediction

For today the charts certainly look bullish to start with so we may well get a rise up towards R1 and the top of the declining 30min channel at 6266 area. However, the last time a poll showed the leave camp in the lead the market dropped. Not that polls actually mean anything anyway. We have had an overnight dip down to the pivot at 6216 already, however, if we see a test of that pivot in hour I think a long here is worth a go. We have often had bullish Monday’s over the past few months, followed by bearish Tuesdays and certainly looking at the moving averages I think that this morning could be positive, with the bulls keen to build on Friday bounce back. The 2 hour chart is still bullish and we may well get a green coral this morning at 6212’ish if the bulls can hold onto their gains. 6198 is the Hull 100 MA support again, same as Friday. So, generally today I am favouring buy the dip, and I am watching the 6315 area for more major resistance as we have the top of the 2 Bianca channels here. Speaking of which, the support from both are around the 6150 area as well, so that worth a watch too!

57 Comments

  1. Hello chaps, glad to be back (not really).
    Not much striking about last week was there, just a shallow inverted V after the traditional Bull Monday?
    Looks like we have another BM this week too, see what happens if/when the mid 60’s area of resistance that Nick mentions either holds or breaks.
    Doesn’t give the impression of wanting to go down very far so far, but I guess the more nervous the market gets about Brexit the more vulnerable it is.
    Don’t know about you, and it’s probably indicative of the demography of my social circles, but I’d say it’s about 10 voting Out to 1 voting Stay In, from the people I talk to.

    1. Morning Tmfp funny you should say about the 10 in 1 voting out, I have ask about maybe 200 people from all walks of life, and I would say its been round 8 in 1 want out, also reading that France also want a referendum now.

    2. yes, nostalgia … great thing
      ah miss the triumph stag, the trip to the red phone booth to call aunty Agnes, shops closed on Sundays, the trip to the post office, holidays in Pontins, going to the airport to sit outside the perimeter and watch the BOAC plane land from those distant foreign countries like Belgium, pay 1 weeks wages for a shirt
      Those were the good days, dreaming and sleepwalking back to them on the 23rd
      just cant wait for the return of Upstairs & Downstairs

      1. Oh nearly forgot, to listen to those immigrants with funny accents from Norfolk or from Bangor, those were the days

        1. Jsft would say a good half I have asked are under 25 and would not remember those things, guess the future generation want some chance of being able to buy or house, or maybe its that can see that Cameron lie’s like a cheap watch.

    3. The main comment I get is about “sovereignty”, foreigners making our laws, straight bananas etc.
      Ironically, in the main the people that prize this self determination also seem to be the most cynical about our home grown politicians too.
      Definitely also a demographic gap, old/out, young/stay in.
      As JSft says “The Good Old Days”.
      Rationing and nits.

      Not much about in the way of opportunity this morning, 50% retrace of 28/65 held at 46 and that half hearted 0935 attempt at the highs petered out, so I guess it’s 45/65 until it isn’t.
      DAX has given up more of this morning’s gains than us, 110 then 100 support. 150 new highs seem a long way away.

  2. Hi guys…..just thought I’d comment …….yes we will be much better out of the EU…..it’s ruining our country…don’t think it’s happening though unfortunately :0(….

    1. yep could not agree more its out for me, and hopefully a bonus vote of no confidence against David Cameron afterwards

  3. Smoking
    Politicians, the In’s or Out’s, cretinious liars. Promises, promises and lots more. The problem is that they are affecting the basal layer of everybodies insecurities, and most humans are sheep with a capital S. The tories game plan, as it has been for the past 200 years. Put a blindfold over the people of this country and feed them with tripe mixed with b**ls**t. The sad thing is evolution has not had enough time to change the sheep’s brain. Unfortunately Great Britain is having to go with a begging bowl to the mafios of Russia, Africa, kazakthan, Chile, and the govt of Saudi, China, Brunei to keep the ship floating. have the tories told anybody this?
    Sorry Smokingaces, this referendum is taking this country down the proverbial plughole.

    1. Jsft yeh because Labour done a great job when they were in control, and I disagree with you calling most people sheep, think that statement make you think you are above the average person in the UK.

      1. I went for a haircut on Saturday. Asked the barber, what side she was voting. She said ” definately Out “. i asked her Why?. She said – I am a single mother and I am doing it for my 8 year old son. So I pressed her a little more – ” what in particular “. ” well ” she replied , ” those Eastern Europeans are coming and taking our jobs, and we are paying all our taxes to europe instead of the NHS and child care”.
        I closed my eyes as she asked me ” do you want the blade on your neck sir” and just thought .. How Refreshing to hear such original ideas.

  5. well started the week good with testing my ”new but needs development trading style”
    Will keep you updated to see how it develops.
    Good luck all this week.

  6. well got 40 points this morning so off too polish the old triumph Stag back this afternoon for the Dow. Gl all.

  7. Well looks like we’re having a try at new highs without DAX help, getting a bit overbought though.

    1. Sort of broke through doesn’t want to pull back much lower than 60 to correct though. No interest from the DAX in following though and the tick gaps indicate pretty low volume.
      But to the moon then I guess later, with the DOW no doubt in a bullish frame of mind too after those amazing NFP’s lol.
      For a society built on debt and a strong dollar, they seem unduly concerned about an interest rate rise.

  8. Morning all, how are we doing?
    tmfp – Norfolk Broads – just down the road from me and the weather was hateful last week, should be here today!
    FTSE – well it seems buy the dips carries on, I’m not sure the black swan can change anything – rubbish NFP’s, buy the dips, interest rate rise, buy the dips, BREXIT, buy the dips etc etc.
    Brexit – As posted I was of the opinion that 4-1 was far too high, appears I may have closed that too early. That said, whilst I’m undecided at the moment, I think if the the binary got down to 60-ish I’d be a buyer.
    Good luck all, I’m not really playing at the moment, got a bit too much real work on.

  9. What’s your analysis of the FTSE and Dax from a slightly longer term perspective? Both see to be in a pretty nice uptrend since February but there seems to be head and shoulders under construction on both. Neither are very well formed h&s, but they are still there. And given the summer approaching, with its historically bearish bias, I wonder if we get big falls over the next three months or so. Maybe after the EU vote?

    1. I did think 6270 would have been slightly better resistance today but its holding up well. Lots of variables coming up – Brexit, US rate hikes (don’t think the BoE will be raising ours any time soon though), Japan stimulus, China, plus things we haven’t thought of yet. IG were mooting 6450 earlier too. 6315 is near term resistance on the daily. with 6390 above that for the 20 day Raff.

  10. For the FTSE, IF you say April 2015 7123 was the top of that six year bull run, either temporarily or permanently, then 5710 was the 38.2% retrace. In these timeframes and numbers, an overshoot to 5500 is ok.
    If the bull run is to resume, then the first major obstacle is the 50% retrace of the retrace, i.e. 6320, so this recent hard work getting through there and maintaining a weekly close above it shows that this is quite a crucial level, with the next r/t of r/t being 61.8% @6508.
    As far as the DAX goes, all I see is the 3 times tested downtrend off the April high which currently needs a 10500 weekly close to break, and lower lows/highs all 2015 so far since the QE LaLa rally to start the year.

    Tl:dr, we either go up or down from here. 🙂

  11. So….DOW?
    Recent high 17931 looks near enough to be tempting, would probably pull us to around 6300. That would only be 120ish up, so I’d be looking for quick out of the blocks, pullback and then a grind up, basically >6300 before <6250 seems likely.

  12. Hi tmfp – hope you are well, are you waiting to short 6300 or you have already shorted 90s?

    1. Hi Rick, neither actually mate, I have a 76 long from the DOW opening and am waiting to see if it goes straight to p/h @931. Locking half in on an 8 pt trailing stop and running the rest.
      Not particularly bearish atm; give me time 🙂

      1. But this potential s/t top on the DOW gives me pause for thought/greed, so half gone at 301.

      2. Nice one 🙂 I just shorted 6300 and took +4 lol.
        Holding longs are really not for me, I am always bearish for some reason.
        Anyways shorted 6300 just now again.
        GL tmfp

        1. It looks like it’s heading to 80s now will wait until 3:30-3:45 and then will try to go long and then short again for MHH.

        2. Yes, I noticed 🙂
          I prefer to work from the short side too, no doubt about it, but seeing as I’ve had a week away to think (occasionally) about trading, I’m making an effort to be a bit more neutral.
          If the signals are there I’ll take it, long or short.

          Overall for the summer, I think we’ll be ranging with the occasional change of band (probably up), so it makes sense to take advantage of any opportunities, even though really all you want to see is gurt big red candles. Not until the autumn, at least, imo.

          1. I understand, I actually took a couple of days off last week and was just going through the way I get stopped out of the trades or sometimes missed some good opportunities so I am also trying to be neutral now.
            Hence bought the dip on Friday at 6175 and 6170 because of 15 min chart was super sold out and NFP bad numbers meaning that FED might hold on rates so I went long with a good R/R in mind and target was 6250 for this week with a stop of 20pts and I bloody let it go at 6189 or something.
            I guess I need a little bit more time to workout my weakness about holding longs!

  13. Seems pretty comfortable around here 17900/6295, wouldn’t be surprised to see strong into our close, but would really like to see how the DOW copes with the fore mentioned p/h at 931. I think I’l bale the remains of the long if the DOW gets into the 80’s again.

  14. Bloody hell chaps I’ve nailed some points today….Ftse +5.8
    +4.18 +3.82 +4 +10.5 +7.6 +27 +43.7 +41.2 +39 +37.7+36.2 +38.7 and just +7 and + 3 on Dax……all out of Ftse at 93.5…… I had to nip out or I could have dumped them at 6300 not complaining :0). If anyone wants to see entry points and exits to the trades I can post but didn’t think you would be interested ….good luck lads ….cup of tea now.

    1. Good start to the week anstel, you do well when it goes up, just tend to have a prob when it goes down and you get married.
      See if you can avoid that this week.

      1. Hi tmfp ….I switched the computer off and went out…..like you mentioned …….last week I got stuck having one last go and ended giving a big chunk back Friday in my quest for safety and risk off ….that Paris thing taught me to respect risk a lot more at weekend.yes I’m not that good at shorting yet but I will get it…..just still nervous with shorts and trying to take on the steamroller…..still happy as Larry at the moment but working out my next plan of attack…..good luck mate and I’m glad you had a good week last week….all the best…..

  15. Well that was a pretty dreary day back, strange bit of after bell dumping going on with the FTSE, probably worth a long if it gets back into the 60’s.
    Tomorrow 🙂

    1. If you are about tmfp…a quick mental fib…..300……. 230…..65 or below is 50%plus….I think that’s about right isn’t it?

      1. Out of my seven longs at 5x 69.5….one at 69.4…. And one at 69.1. No point in being greedy.

        1. I read last yr that a lot of the booming high end Auto “buys” in the U.S are by people who have homes valued at less than the 4×4’s they got a trade in deal on and are paying for in installments.

      1. Trouble is the sort of market he’s describing is real chaos, unrelated random moves, day to day.

  19. Morning went short at 10.8 and 14.5. Took +3 on 14.5…..May have to dump 10.8 though….

  21. Morning anstel
    Role reversal lol, I longed up to 10, but now switched round and short.
    Keep an eye on the DAX though, I reckon that’s got another 20 in it to about 85.

    There should be a fair amount of tech resistance around 20ish, but wouldn’t discount a sellable blip to 30+, would be surprised if much further than that.

    1. Thanks tmfp….I just sold two Dax longs I put on yday as well at 259.1 and 260.7…..I bought one at 144.5 and I’m sorry I didn’t buy the other yday had it a few days….it was in the box…..I think I bought that one at 196 but it’s not in my short term history…….hey good luck mate fwiw I think this is a nice pump and dump so they can screw us over with a big Brecht sell off…..might get your 5500 if they I ploy some scare tactics…

      1. Predictive text changes my words…..it should be “big brexit sell off”……and employ scare tactics….

        1. Another quick bit of feedback again Nick……I’ve had two gateway timeouts …..server did not respond in time…..don’t want you to lose your site participants through them not having patience to repost.

          2. Hey no problem Nick ….I fully understand teething problems with equipment……and the balancing act of trying to keep the customers happy..only commenting so you are fully aware,it’s by no means a complaint or anything…..you provide a great service and I am very grateful along with everybody else I’m sure….good luck today Nick…..

            1. Thanks and also for the feedback. Its actually a bit annoying that it keeps showing those errors. I have just set up an account with TSOHost which was recommended on here by someone (thanks whoever that was) and just got to move the site again. Should be more reliable anyway!

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