12th July 2019
Sterling enjoyed a second day of gains against the dollar as markets reacted to dovish comments from Federal Reserve chairman Jerome Powell. The pound has risen 0.4pc to $1.2558. The pound also strengthened against the euro after the ECB made its own accommodative comments, suggesting that a stimulus could be on the way as soon as this month. The ECB said it was “ready and prepared to ease the monetary policy stance further” against the backdrop of continuing economic uncertainty and fears of an escalation in the global trade war.
The FTSE 100 shed 0.28pc to close at 7,509.82, while the broader FTSE 250 went in the opposite direction, adding 0.12pc. US stocks have continued their strong performance with the Dow passing the 27,000 point milestone for the first time and the S&P 500 also circling record highs.
BOE
The Bank of England has said the UK’s banks, insurers and dealers are ready for a no-deal Brexit but warned that “the perceived likelihood of a no-deal Brexit has increased since the start of the year”. Here are some of the key points from the Bank’s Financial Stability Report:
- Major UK banks are strong enough to handle a “worst-case disorderly Brexit” and continue to serve households and businesses
- A trade war would damage the global economy at a difficult time but banks are strong enough to keep lending
- The Bank expects a no-deal Brexit would lead to “significant volatility and asset price changes”, which could hut the economy
Separately, policy makers at the European Central Bank have signalled that they stand ready to provide more stimulus to the eurozone economy in the face of economic uncertainty. The comments increase the likelihood of a rate cut at the ECB’s next key meeting in July.
Asian markets
Asian equity markets were mixed after U.S. stocks rallied late to close at a record high. Treasuries retreated after the latest American inflation reading came in hotter than anticipated. The S&P briefly crossed above 3,000, while the Dow Jones surpassed 27,000. The dollar fell for a second day, while oil and gold retreated.
FTSE 100 Trading Signals, Forecast and Prediction
Another day and the US continues to push on with the S&P finally starting to pull away from the 3000 level. 2986 is locking in as support now and a rise towards 3030 looks distinctly possible with a longer term 3115 still showing on the longer term charts. The FTSE has been a bit more lacklustre though, but the bounce off 7500 yesterday bodes well for further upside towards the 7580 resistance level. I still have 7622 above this but the bulls are struggling to break though the bottom of that 7560/7580 resistance area at the moment. As such, if we see 7560 again today it may well be worth another short but the more it is tested the more likely it is to break. If so then we should get a rise to 7580.
I expect the US bulls will want a strong weekly close today, and we may well have a bit of bull Friday. The S&P does like closing Friday positive after all. I expect the FTSE breaking below the 7520 support yesterday will have sucked in a few bears who may well be on for a bear squeeze now, if we do get a rise towards the 7580+ area. The 2 hour chart has gone bullish again with 7523 showing as moving average support, though the bulls need to break 7542 initially where we have the coral (and the line that we dropped off yesterday at 7555).
The daily chart remains bullish with the Raff channels heading up, and the 25ema showing support at 7468 so should we get a dip down to this level we should see a bounce here. Below this then 7420 and 7380 are the next levels of note to look out for. That said, the FTSE’s “poor” performance so far means it could quickly drop quite fast once the US markets start to pull back. After all its all waves and cycles and they won’t keep making record highs indefinitely. We have been here many times before and they always drop back. The fear/greed is at 62/100 now. Once that gets to “extreme greed” (75/100 and above) then we will probably start thinking about the highs being in. For the moment it’s being chased higher on the possibility of rate cuts.
Todays news highlights include Chinese trade, Riksbank minutes, IEA monthly report, Eurozone IP, US PPI, Baker Hughes Rig Count, BoE’s Vlieghe, Norges Bank’s Nicolaisen, Fed’s Evans.
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