18th July 2019
Wednesday in a nutshell –
- Pound could plunge to parity against the US dollar in a no-deal Brexit – Morgan Stanley
- Pound sinks further after hitting a two-year low yesterday
- Markets jittery as perceived likelihood of no-deal Brexit rises
- UK inflation remained steady at 2pc in June
- House price growth slows to 1.2pc with London prices plummeting 4.4pc
Stock markets in Europe headed lower into the close as trade concerns have resurfaced. President Trump said a trade deal with China has a ‘long way to go’, and he also reminded the Chinese government that tariffs could be slapped on $325bn worth of goods. The announcement from the US leader was a gentle reminder the situation isn’t resolved, and traders used it as an excuse to trim their equity positions.
In the US, the S&P 500 and NASDAQ 100 were lower as traders are a little nervous in relation to US-China trade relations. Both indices recently were at record highs, and the remarks from Mr Trump acted as a speed bump for the bulls. Traders know when he is angry, and latest comments seem like a mild warning to China, and that’s why stocks are moderately lower.
Gold Shines as Stocks Sink
Asian equity futures had a rough opening after U.S. stocks declined on mixed corporate earnings and lingering trade tension. Treasuries rose, with 10-year yields down more than four basis points. The dollar dropped against most of its G-10 counterparts, with the kiwi and loonie leading the way. Gold jumped more than 1%, helped by comments from Dalio, who said adding the metal to one’s portfolio “would be both risk-reducing and return-enhancing.”
FTSE 100 Trading Signals, Forecast and Prediction
The bulls failed to defend the 2 hour support at 7540 yesterday and overnight we have dropped further back to 7500. However, we are nearing the daily support level with the 25ema at 7482 and the bottom of the 20 day Raff channel at 7462. We are also testing S1 as I write this at 7497, so we may well see an initial hold of this level for a rise towards the cluster of resistance levels around the 7540 level. The bulls failed to break above the 7580 level really, though they did of course manage 7590, but since then they have been not he back foot and the bears have been helped by trade talk coming back to the fore as rate cuts have faded into the back ground.
If the bulls can defend the 7500 area initially then we should see a gap close toward the 7540 level and we also have the 30min coral, pivot and 200ema there, as well as the 2 hour resistance having gone bearish on that after the dip from 7575 yesterday. If the bulls were to break above 7545 then that 7580 resistance level is still relevant, as is the slightly higher daily resistance at 7598. Above these then that 7620 I have had all week is still showing as a decent shorting level, with an outside chance of a rise as far at 7685, though probably not today for that one.
Earnings have been mixed so far and we are seeing profit taking after the recent climb on markets. We do have the Fed meeting in two weeks and we may well see rate talk come back to the fore around then. For the moment, focus is on earnings and trade talk.
if the bears were to break below the 7475 level then a drop as far at 7425 looks possible, though this pull back from 7580 is heading towards the decent looking support from the 25ema on the daily at 7482, so it will be interesting to see if that area holds, at least initially. If it doesn’t, then we should see 7450 which is the next support area and then the 7425 level.
Todays news highlights include UK Retail Sales, SARB & BoK Rate Decisions, Fed’s Williams & Bostic, supply from Spain and France
Todays earnings are Microsoft, Union Pacific, Morgan Stanley, Phillip Morris, SAP, Novartis, Danske Bank
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