18th October 2018
The bulls defended the 7020 level yesterday to keep the FTSE 100 above the 7000 level, and the possibility of a rise towards 7165 and 7258. That said, it does seem to be struggling a bit! I am still holding the gold short from 1227 from yesterday with the stop now at breakeven, thinking it should move lower today (gold is a slower moving instrument so generally needs holding longer).
Inflation has pulled back sharply to its lowest level in 18 months, easing the pressure mounting on UK household incomes. CPI slipped for the first time in five months in September, dropping to 2.4pc as falling prices for food and ferries offset climbing energy costs.
Consumers have been squeezed by stagnant pay growth and high inflation in recent years, forcing households to tighten their belts. However, sticky inflation is now showing signs of cooling and pay rises surged to a nine-year high in August. If the pick-up in pay is repeated in September, the UK will be enjoying its strongest real wage growth since 2016.
Lower inflation combined with the jump in wages “should provide increasing support to household spending growth”, said Andrew Hishart, an economist at Capital Economics.
He added that the surprise drop in inflation takes the pressure off the Bank of England to lift interest rates “before it knows the outcome of the Brexit negotiations”.
The drop put pressure on the pound ahead of the crucial Brexit summit in Brussels. Sterling erased yesterday’s gains, slipping back 0.3pc to $1.3140 against the dollar.
FTSE 100 Trading Signals, Forecast and Prediction
For today I am thinking that we might get a bit of a dip and rise scenario with a drop down to the support area around 7005. The 30min chart is bearish to start with, with coral and 200ema resistance at the 7067 level. The bulls failed to push above the 7080 level yesterday with any conviction and they need to do so in order to open up a trip to 7165. Ergo its worth longing a break of that resistance level if they are able to break it.
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