FTSE 100 Support 6961 6946 6916 6913 6876
FTSE 100 Resistance 6967 7000 7001 7054

Good morning. Well it was bearish for most of yesterday though unfortunately didn’t get the little pop up initially to 7025 for a decent short entry. The 6990 level I mentioned in the afternoon update turned out to be a great trade – at the time it was very 50/50 which is why I didn’t SMS it. Always the way when you don’t think they are going to work, they do! The gold long worked well, hitting target for a small gain. Its mostly hovering around the 1250/1260 area, so if the bearishness on the indices starts to gather some pace then we may break through the gold 1262 resistance. Still got the long term longs at 1250. Of note as well was that the two Bianca channel supports were tested and held – 6975 initially (20 day) and 6950 (10 day). The Bianca channels haven’t had much luck recently, with the price carving straight through them, so maybe they have turned the corner and coming back into relevance.

US & Asia Overnight from Bloomberg

Asian stocks rose by the most in two weeks and the dollar weakened versus major peers amid speculation U.S. monetary policy will remain accommodative. Fading prospects for interest-rate cuts in Australia and New Zealand boosted their currencies and weighed on the nations’ bonds.

Raw-materials producers led gains on the MSCI Asia Pacific Index as the greenback’s slide gave a lift to commodities priced in the currency. The Bloomberg Dollar Spot Index extended Monday’s retreat from a seven-month high after reports showed New York manufacturing unexpectedly shrank and U.S. factory output barely grew. The Kiwi led gains among major currencies after inflation data, while the Aussie ranked second as the Reserve Bank of Australia highlighted the risks of monetary easing. Oil rose above $50 a barrel.

The U.S. interest-rate outlook continues to occupy investors with futures prices indicating a 66 percent chance that borrowing costs will be raised before the year is out. The Bloomberg U.S. ECO surprise index — which measures whether economic data have exceeded or fallen short of analysts’ estimates — fell below zero for the first time in two weeks ahead of American inflation figures on Tuesday.

“The dollar has struggled to gain upside momentum today because of further evidence that the Fed’s tightening cycle will be very gradual,” said Elias Haddad, a senior currency strategist at Commonwealth Bank of Australia in Sydney.

Stocks

The MSCI Asia Pacific Index added 0.4 percent as of 12:51 p.m. Tokyo time, with a gauge of raw-materials producers rallying 0.9 percent.
Hong Kong’s Hang Seng Index advanced 0.9 percent and the Shanghai Composite Index rose 0.5 percent. China may release September lending figures before Wednesday’s report on gross domestic product.

S&P 500 Index futures gained 0.3 percent, while contracts on the U.K.’s FTSE 100 Index climbed 0.4 percent. Netflix Inc. surged 20 percent after regular U.S. trading hours, as the online television service said it added more subscribers than estimated in the third quarter. Goldman Sachs Group Inc. is among American companies posting results on Tuesday.

Currencies

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, declined 0.2 percent. The pound strengthened 0.4 percent before the U.K. releases September inflation figures on Tuesday.

The Kiwi climbed 0.7 percent after New Zealand said its consumer prices rose 0.2 percent from a year earlier in the last quarter, more than the 0.1 percent increase forecast in a Bloomberg survey. Some economists said the data may weaken the case for interest-rate reductions beyond November.

The Aussie strengthened 0.6 percent and touched a two-week high. Reserve Bank of Australia Governor Philip Lowe said Tuesday that trying to revive inflation too quickly could threaten financial stability by inciting a new round of borrowing by heavily indebted consumers. He spoke before the release of minutes from the RBA’s last policy meeting, which showed economic expansion was forecast to continue at a moderate pace.

Bonds

The yield on U.S. Treasuries due in a decade rose one basis point to 1.78 percent, after declining three basis points on Monday. Longer-dated notes have slumped this month amid concern inflation is gathering pace and Tuesday’s data are forecast to show American consumer prices increased 1.5 percent in September from a year earlier, the fastest pace in almost two years.

“Everybody is talking about the inflation rate,” said Kim Youngsung, head of overseas investment in Seoul at South Korea’s Government Employees Pension Service, which has $13.2 billion in assets. “We are expecting an interest-rate hike in December. Worldwide, everybody is worried about interest-rate hikes next year.”

New Zealand’s government bonds were the biggest movers in Asia, with the 10-year yield rising by five basis points to 2.61 percent. Futures traders were assigning a 79 percent probability of a an interest-rate cut at the central bank’s Nov. 10 meeting compared with 84 percent on Monday.

The yield on Australian debt due in a decade increased by two basis points to 2.33 percent. The chance of borrowing costs being lowered by the end of 2017 slipped to 25 percent in the futures market from 33 percent on Monday.

Ezra Holdings Ltd. became the latest oil services company in Singapore to seek leniency from its creditors, requesting waivers from bondholders on some of its debt covenants. Its Singapore dollar bonds due in 2018 have dropped to about 41 cents from 89 cents three months ago, according to prices compiled by Bloomberg.

Commodities

Crude oil was up 0.6 percent at $50.22 a barrel in New York, after slipping 0.8 percent in the last session. The price has fluctuated near $50 so far in October amid uncertainty about whether the Organization of Petroleum Exporting Countries will implement a Sept. 28 agreement to reduce supply. An OPEC committee will meet later this month to try and resolve differences over how much individual members should pump.Gold rose 0.3 percent, while copper, aluminum and lead climbed by the most in a week.

“The Fed is likely to hold fire on interest rates until December at the earliest,”Jordan Eliseo, chief economist at Australian Bullion Co. said by e-mail. “Data is still mixed, and there seems little justification to push through a hike.” [Bloomberg]

FTSE 100 Outlook and Prediction

Its earnings season in the US hence things are a little choppy at the moment, and some decent earning reports (Netflix) have helped the futures prices battle back from the lows last night. There is a 8.7 divi tomorrow by the way too. The bulls will be keen to break the daily pivot at 6967 initially this morning for a rise towards 7000, where we have a few resistance levels – 200ema, R1 and 2 hr coral (though this will be the second test of the latter, having dropped off it when we tested it on Friday at 7045).

To start with the 30min chart looks positive for an initial rise, though the bears will be motivated by the fact that they managed to drop it quite fast yesterday from that 6990 level. I am generally thinking that the bears have the slight edge on who is in control, and we are going to get a dip down towards 6800, before a rally back to 7150ish then a bigger down. So, for today the trade that looks the most viable at the moment is a short at around the 7000 level. Tricky price action at the moment, thats for sure!