12th March 2019
Theresa May’s eleventh-hour dash to Strasbourg to salvage her Brexit deal boosted the pound back towards a 21-month high versus the euro as the City braced for the trio of crucial votes in Parliament.
Sterling reversed early losses on hopes of the prime minister gaining a late concession from the EU to persuade the DUP and the Tory rebels to back her deal. Traders’ expectations for pound volatility spiked before the series of votes while ING revealed that short positions against the pound are 40pc smaller than they were before Mrs May’s crushing defeat in the first vote in January, signalling rising optimism on currency markets.
The FTSE 100’s strong early gains were dampened by sterling rallying on rising expectations of the prime minister returning with a new deal to present to MPs. The pound surged 1.1pc versus the euro to hit €1.17, just below a 21-month high.
US Stocks rally
Shares in Asia look set to advance after U.S. stocks rallied the most in six weeks. Chipmakers gained on deal news and the latest retail-sales data boosted confidence that the American economy isn’t headed for a downturn. The S&P 500 surged past its 200-day moving average, while the Nasdaq 100 jumped more than 2 percent amid an Apple upgrade. Nvidia agreed to buy a competitor, sending the Philadelphia Semiconductor index to its biggest gain in a month. The Dow Jones Transportation Average stopped the longest string of drops since 1972. Boeing retreated after some airlines grounded 737 Max flights following a crash Sunday. It is the biggest component of the price-weighted Dow Jones Industrial Average and the only of the 30 blue chips to retreat.
Global Economy Weakest in a Decade
The global economy’s sharp loss of speed through 2018 has left the pace of expansion the weakest since the global financial crisis a decade ago, according to Bloomberg Economics. Its new GDP tracker puts world growth at 2.1 percent on a quarter-on-quarter annualized basis, down from about 4 percent in the middle of last year. While there’s a chance that the economy may find a foothold and arrest the slowdown, “the risk is that downward momentum will be self-sustaining,” say economists Dan Hanson and Tom Orlik. The reasons for hope? The Federal Reserve’s decision to pause its interest-rate hikes, a U.S.-China trade truce and the fading of the shocks that battered Europe in 2018 could mean stabilization is around the corner. Other central banks have also stepped up, with the European Central Bank last week announcing new measures to help the economy through the current weakness.
Better Brexit Deal?
U.K. Prime Minister Theresa May has secured “legally binding changes” that “strengthen and improve” the nation’s divorce deal from the European Union, her deputy David Lidington told lawmakers late on Monday in London. He said the government has secured alterations to the withdrawal agreement and political declaration on the future U.K.-EU partnership, and that negotiations were ongoing in Strasbourg, France. The pound surged. “For now, markets seem to take it positively that there is a possibility of result other than a delay and that’s spurring short-covering, with people squaring positions,” said Shinsuke Kajita, chief strategist at Resona Holdings.
FTSE 100 Trading Signals, Forecast and Prediction
Yet again we have Brexit at the forefront of the news today with another vote on May’s deal. The effect will be that the pound may end the day anywhere in a range of 10 percent given the gulf between possible outcomes to the vote, according to strategists. If that is the case then the FTSE100 will also be impacted quite heavily. Will this deal get though? Following last-gasp talks in Strasbourg with Jean-Claude Juncker last night, Mrs May said she had secured “legally binding” changes to the EU Withdrawal Agreement that will prevent the backstop becoming permanent.
So, taking the news aside, let’s look at the key levels that are likely to be in play today. We have hovered around the 7130 area overnight which is where we closed yesterday, though the 2 hour chart has gone bearish again, but the resistance isn’t that strong. The bulls tried to break above the 2 hour coral yesterday which was the 7155 resistance level, and may well try again today. As mentioned yesterday they will be trying to push for 7210 which is the recent high, and a break of that is likely to see 7232 where we might see a stutter. Above that then there are a couple of longer term resistance levels at 7261 and 7266. If we get some big moves based on the vote result then it’s possible that we may spike this high. Worth shorting this area.
I have plotted a slightly bearish day with the arrows today as we might well be a bit jittery and the pound will weigh on the FTSE. I have gone for an initial short off the pivot area at 7150 for a run down towards the 7104 and 7068 resistance areas. If we see this lower level then I am expecting to see a bounce here. We bounced just above this on Friday and also just missed the 7111 long yesterday so there is still some buying pressure around. The daily chart remains bullish for the moment, with the bulls defending spikes below the 25ema, which is at 7115 for today.
The S&P chart remains bullish and after that strong performance yesterday the 2 hour chart still has support at 2747 – a dip to this area is worth going long on.
Expect a choppy day on the FTSE 100 today and watch the moves that cable (GBPUSD exchange rate) makes as that will follow though to the FTSE. If cable rises then the FTSE 100 will fall, if cable falls then the FTSE 100 will rise. Good luck today.
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