Support 6070 6064 6036 6024 6000
Resistance 6135 6190 6195 6202 6249
Good morning I hope you had a good weekend. That was quite a sell off on the FTSE 100 on Friday, down over 2% as Brexit fears weighed on traders minds going into the weekend, Latest results were showing the leave camp gaining on remain which spooked the markets. Probably a good week to take off this one as we head towards the vote, but on the other hand the increased volatility should help the number of points on offer. Bear in mind that most platforms have increased their margin requirements this week to cover this increased volatility. Optimism has given way to fear in global financial markets since the middle of last week as polls indicated the U.K.’s June 23 referendum on EU membership is too close to call. Economists predict an exit vote will send the pound to the lowest level in more than three decades, while a victory for the ‘Remain’ camp would drive the currency toward the highest this year. Also keeping investors on edge are monetary policy reviews being held in the U.S. and Japan this week.
US & Asia Overnight from Bloomberg
- Bearish bets on sterling are highest in almost three years
- Ten-year yields sink to records in Japan, New Zealand, Taiwan
Asian stocks tumbled by the most in two months and the pound sank to an eight-week low amid growing anxiety the U.K. will vote to leave the European Union. The Japanese yen rose and sovereign debt rallied as investors piled into haven assets.
The MSCI Asia Pacific Index retreated as emerging-market currencies weakened across most of the region. The pound slid for a fourth day after a poll showing a 10 percentage-point lead for Britain to exit the EU sent it tumbling late on Friday. The yen rose toward its strongest level since 2014 as 10-year bond yields dropped to records in Japan, New Zealand and Taiwan. Oil retreated after a report showed an increase in U.S. drilling rigs, while the price of bitcoins surged to a two-year high.
Optimism has given way to fear in global financial markets since the middle of last week as polls indicated the U.K.’s June 23 referendum on EU membership is too close to call. Economists predict an exit vote will send the pound to the lowest level in more than three decades, while a victory for the ‘Remain’ camp would drive the currency toward the highest this year. Also keeping investors on edge are monetary policy reviews being held in the U.S. and Japan this week.
“Everyone’s scared,” said Ryuta Otsuka, a strategist at Toyo Securities Co. in Tokyo. “There are too many events coming up for investors to take a plunge.”
While the Federal Reserve is seen leaving interest rates unchanged on Wednesday, its post-meeting statement will be scrutinized for signals regarding the timing of the next hike in borrowing costs. Most economists expect the Bank of Japan to expand record monetary stimulus in July rather than on June 16, a Bloomberg survey shows.
Chinese data released Monday added to evidence that the world’s second-largest economy is stabilizing. Industrial production rose 6 percent from a year earlier in May, matching economists’ estimates, and retail sales climbed 10 percent. Financial markets are shut for holidays in Australia and Russia.
Stocks
The MSCI Asia Pacific Index sank 1.9 percent as of 1:38 a.m. Tokyo time. Benchmark stock gauges in Hong Kong and South Korea tumbled by the most since February, while Japan’s Topix index slipped 3.1 percent to a two-month low.
“The market hates uncertainty,” said Yoshinori Ogawa, a markets strategist at Okasan Securities Co. in Tokyo. “Most market participants think that the U.K. will probably remain, but we’re seeing some poll results that show those who’ll vote to leave outnumber the ‘Remain’ camp.”
Futures on the S&P 500 declined 0.4 percent, following a 0.9 percent slump in the U.S. benchmark last session, its steepest drop since May 17. Contracts on the U.K.’s FTSE 100 Index lost 0.7 percent.
Currencies
The pound dropped as much as 0.7 percent to $1.4159. It slumped 1.4 percent on Friday after an Orb/Independent newspaper poll showed 55 percent support for the “Leave” campaign, and 45 percent for “Remain.” Surveys at the weekend were less stark, with an online poll by Opinium for the Observer newspaper showing 44 percent support for Britain staying in the EU and 42 percent against. Hedge funds and other large speculators are betting on sterling futures weakness by the most since June 2013, a report from the Commodity Futures Trading Commission showed.
The yen strengthened versus all 16 major peers. The BOJ should expand monetary stimulus as soon as this week by boosting bond purchases rather than pushing interest rates further into negative territory, Nobuyuki Nakahara, an influential adviser to Prime Minister Shinzo Abe, said in an interview on Friday.
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, was steady after rising 1.1 percent over the previous two sessions. Odds of an increase in U.S. key rates don’t exceed 50 percent before December, according to Fed funds futures tracked by Bloomberg. There is zero chance of a move this week, the data show.
The currencies of Malaysia, South Korea and Taiwan all weakened 0.6 percent, leading declines in Asia. The yuan weakened 0.4 percent from Wednesday’s close in Shanghai as trading resumed after a holiday.
Bitcoins jumped as much as 18 percent from Friday’s closing level to $683.89 in Hong Kong, the highest since February 2014, according to data compiled by Bloomberg. Profits from mining bitcoins will be reduced in July, a process that’s written into the code to limit supply, according to Chinese exchanges OKCoin and Huobi.
Bonds
U.S. Treasuries due in a decade advanced for a fifth day, pushing their yield down by two basis points to 1.62 percent, set for the lowest close since December 2012. Average yields for the tenor in the U.S., Japan, Germany and the U.K., which have issued more than $25 trillion in government debt, fell to 0.69 percent last week, data compiled by Bank of New York Mellon Corp. showed. That’s the lowest on record and well below the 5 percent average over the course of 145 years.Japan’s 10-year yield dropped as low as minus 0.165 percent on Monday, while New Zealand’s reached 2.5 percent for the first time and Taiwan’s fell to an unprecedented 0.76 percent.
The cost of protecting Asian issuers’ debt against default increased by the most in three weeks. The Markit iTraxx Asia index climbed three basis points to 145, according to Westpac Banking Corp prices.
Commodities
Gold for immediate delivery rose as much as 0.3 percent to $1,278.50 an ounce, the highest since May 18. A Brexit vote on June 23 could propel prices to $1,400, analysts at Capital Economics Ltd. said in a report on Friday.
West Texas Intermediate crude fell 1.3 percent to $48.42 a barrel after Baker Hughes Inc. data out on Friday showed that rigs targeting crude in the U.S. rose by three to 328 last week, capping the longest run of weekly gains since August. [Bloomberg]
FTSE 100 Outlook and Prediction
The bulls have a chance today to force a rise towards the pivot at 6134 and possibly the bigger resistance on the 2 hour chart at 6195. Whether they will actually manage it or not remains to be seen, however, shorting the rallies still feels like the best play at the moment with the brexit uncertainty and the leave camp gaining ground. Not that I have ever really trusted polls and they got it massively wrong for the last general election. We also have the FOMC this week (Wednesday) with the latest rate decision (sticking as is most likely). So, We might see an bit of an initial bounce as we are at the bottom of the 10 day Raff at this 6070 area, but the next support below this is 6026 where we have a fib pivot and a 30min PRT line. The charts are all pretty bearish though so its brave longs at the moment thats for sure off support levels – cut and run if they don’t hold. As an aside, if the leave camp do win the referendum then we will probably be dipping towards 5500 again in a few weeks. Back to today, if the bulls do manage a climb towards the 6190 area this is decent looking resistance on the 2 hour chart and a good spot for a short entry. We also have the red coral on the 2 hour at 6249. The bulls will need to be quick out the blocks today for any rise, after that trending day on Friday. With all these trending days if the support level (or resistance level) breaks then expect another one so just flip positions. I.e go short on a break of 6036, and long on a break of 6135.