Support 6275 6263 6261 6219
Resistance 6307 6310 6325 6371
Good morning. Interesting day yesterday that saw pretty much all the trades work out on Dax, S&P, Gold and FTSE and saw the FTSE bulls defend the 6265 area, break through the 6300 resistance area and push up to 6340 after hours. However, Japan threw a spanner in the works for them overnight by refraining from more stimulus which was unexpected. The 8 point divi saw the buyers come in at 4pm and bring it up to the close, quite strongly for a relatively small dividend. Japan’s stimulus stance might unsettle the bulls a bit today though, and we also have the Fed reiterating that interest rate rises will be gradual.
US & Asia Overnight from Bloomberg
The yen jumped the most in eight months, Asian stocks reversed gains and U.S. equity index futures fell after the Bank of Japan unexpectedly refrained from adding to record stimulus. Crude oil held above $45 a barrel after the Federal Reserve reiterated that U.S. interest-rate increases will be gradual.
Japan’s currency rebounded from near this month’s low, while the MSCI Asia Pacific Index slid for a fifth day. New Zealand’s dollar appreciated versus the greenback after its central bank held off from lowering borrowing costs. Crude traded near a five-month high after data showed U.S. output slid to an 18-month low. The yuan swung to a gain following the BOJ’s announcement, and U.S. Treasuries rallied.
“It’s a total shock,” said Nader Naeimi, the Sydney-based head of dynamic markets at AMP Capital Investors Ltd., which oversees about $120 billion. “From currencies to equities to everything — you can see the reaction in the markets. I can’t believe this. It’s very disappointing.”
The BOJ’s decision shattered the sense of relative calm that was evident in financial markets after Wednesday’s Fed meeting did little to shift expectations on the likely pace of U.S. interest-rate increases. Rebounds in stocks and commodities appear to be losing momentum as data indicate the world economy is expanding at a tepid pace amid what’s forecast to be the worst U.S. earnings season since the global financial crisis.
Hours before the BOJ announcement, Japanese economic data for March underlined the struggle policy makers are having as they seek to achieve a 2 percent inflation target. Consumer prices excluding fresh food dropped the most in three years, household spending slid and industrial production capped a soft rebound for the first quarter after declines in the second half of 2015.
Currencies
The yen surged 1.9 percent to 109.35 per dollar as of 1:15 p.m. Tokyo time. The BOJ left unchanged three key easing tools — the 80 trillion yen ($731 billion) target for expanding the monetary base, mostly through bond purchases, the 0.1 percent negative rate on a portion of the cash banks park at the BOJ, and a program to buy riskier assets including stocks. Policy makers also postponed their timeframe for reaching the 2 percent inflation target, the fourth delay in about a year.
“The consensus has been disappointed, so there’s been a reasonably strong rise in the yen,” said Sally Auld, the head of currency and fixed-income strategy for Australia at JPMorgan Chase & Co. “The accompanying outlook statement feels quite dovish, talking about downside risks to growth and pushing back the return to 2 percent inflation. That will keep expectations of easing from the Bank of Japan alive.”
Stocks
The MSCI Asia Pacific Index was 0.1 percent lower, with Japan’s Topix index sliding 2 percent. Futures on the Standard & Poor’s 500 Index fell 0.5 percent. [Bloomberg]
FTSE 100 Outlook and Prediction
We have the top of the Bianca 10 day channel at 6371 so if we were to get that high I feel that its a good spot for a short, however, prior to that we have resistance at the 6325 area that might be a bit tricky for the bulls to break through today, now that the markets have been brought down by the lack of further Japan stimulus. As such, I am thinking an initial rise for a bit of a gap close towards that area then further downside from there. We have support still at around the 6260/70 area from the daily channels but as mentioned yesterday the more that a support level is tested then the more likely it is to break – the 20day Raff at 6265 has been tested a few times now, and we have the 20 day Bianca now at 6261 as well. A break of this area will likely see a slide down towards 6200. So, I am back to feeling a bit bearish again again after yesterdays bullish (quite contrary aren’t I!) stance, and feel that once again shorting the rallies is a good plan for today. I don’t think we will reach the 6371 area today but if we do then its worth a short there too.