21st April 2017
Good morning. A pretty flat day on the FTSE 100 yesterday after the bearish start to the week. The bulls managed to defend the 7090 level but couldn’t really push on past 7125 despite 3 attempts. The gold short we had managed a few points, but the stand out performers where the US markets which rallied strongly. The Dow gaining over 200 and the SP over 20. We head into option expiry today and also the first round of the French election on Sunday.
French Election
Traders have already been grappling for several days with the “nightmare scenario”: a eurosceptic duel between the Front National’s Marine le Pen on the hard-Right and the radical insurgent Jean-Luc Mélenchon on the hard-Left.
An alternative nightmare is now coming onto the radar screen as new polling data suggests that Mr Mélenchon would win handily in a faced-off against the centre-right candidate François Fillon, who has survived a ‘fake jobs’ scandal involving his family but remains toxic for the Left.
“Almost anything is possible based on the polls. Markets still appear to be underpricing the risks,” said Athanasios Vamvakidis from Bank of America. He warned that markets will immediately start to price in “Frexit risks” if it is a Left-Right fight, triggering a “Brexit-style” crash in the euro to as low as $0.90 against the US dollar. From here
FTSE 100 Outlook and Prediction
Bit of a tricky one to call today ahead of the French elections. There are 3 main levels that I am looking at that might be worth trading off and that is support at the pivot and 30min coral area at 7112 – we might see a bounce from this level and a bit of short covering today. And then for resistance, we have a few levels of note, namely 7141 initially, then 7175 above that. I think this latter might be worth a short but as its option expiry Friday ahead of the French election it might be worth giving it all a miss or just doing small stakes (unless you fancy a gamble of course!).
I have gone for an initial rise this morning building on US strength yesterday (though the FTSE stubbornly refused to budge as the US rose yesterday, kept down by the rising GBPUSD rate) and a stronger showing from Asia overnight. Iron ore prices have rallied which should help the miners overall a bit, indeed the ASX200 had a slightly bullish day today.