17th July 2019
The benchmark FTSE 100 index rose for a second day, adding 45.48 points to close at 7,577.96, a rise of 0.6pc. The rise was likely helped by the weakness of the pound, which plunged to a 27-month low against the US dollar, briefly falling below $1.24 as investors took fright at no-deal rhetoric from prime ministerial candidates Boris Johnson and Jeremy Hunt. Both men insisted that the Irish backstop will need to be scrapped as part of any Brexit deal, pushing markets to increase expectations of a hard Brexit on Oct 31. Sterling also fell as low as €1.1053 against the euro, a six-month trough.
In Europe, the German Dax index put on 0.35pc despite worse than expected readings from the ZEW economic sentiment survey. In France, the Cac 40 gained 0.65pc. In the US, strong figures on retail sales, factory output and housing stocks helped to boost the dollar but stock markets remained subdued with the S&P 500 ceding 0.3pc and the Dow Jones industrial average trading broadly flat.
The pound has dipped below $1.24 for the first time since April 2017 and its lowest level in more than two years as markets take fright at no-deal rhetoric. A report by Sky News that Boris Johnson could suspend parliament in order to force through a no-deal Brexit appears to have been the trigger that sent the pound below the $1.24 barrier for the first time in 27 months. Sky cited campaign sources as saying that Johnson is looking at scheduling a Queen’s Speech to mark the start of a new parliamentary session in early November.
The drop helped the FTSE 100 to reach the 7580 resistance level, and slightly overshoot to 7590, just as the US reignited trade war talk. Trump says there is a long way to go with China on trade and that the US can put tariffs on another $325bn of goods if so inclined.
Wage growth jumped to 3.6pc in the three months to May, excluding bonuses, up from 3.4pc, as the lowest unemployment in 44 years forced employers to compete for workers. Public sector pay growth of 3.4pc is its highest since 2010, with extra funds going into the NHS. The employment rate slipped from a record high as only 28,000 jobs were created, the Office for National Statistics said, marking a sharp slowdown on the bumper gains enjoyed at the start of 2019.
Donald Trump targeted China again. The president reiterated his threat of more tariffs on Chinese goods, after promising to hold off on additional duties in a trade-war truce he reached with Xi Jinping last month. He reasserted that China is supposed to buy more farm products, a pledge Beijing hasn’t confirmed or fulfilled. Still, he insisted he’s doing well with the Asian country.
Asian equity futures are lower after U.S. stocks retreated from record highs on Trump’s saber-rattling on trade. The S&P 500 halted a five-day rally and Treasuries fell on strong U.S. data, but pared losses as Jerome Powell kept up his dovish talk. The dollar rose against every G-10 peer, with the pound faring the worst. Gold dropped. Oil in New York extended losses below $58 after Mike Pompeo said Iran had signaled an openness to talks.
FTSE 100 Trading Signals, Forecast and Prediction
We are getting nearer and nearer to the main daily resistance levels now. 7580 got a decent’ish initial reaction yesterday with the drop down to 7560 but all things considered the bulls have defended that drop pretty well. As such we may well push up today towards the higher resistance levels at 7598 and possibly 7622. Cable is trying to defend the 12400 2-year low at the moment but isn’t really bouncing much as yet. If that does climb then it would weigh on the FTSE, as the drop yesterday helped the FTSE 100 to rise.
The FTSE 2 hour chart remains bullish also, with support at 7534 and 7522 as I write this, but those levels are slowly rising so we may well find support at 7540 this morning if the bears can break below the daily pivot at 7559.
The ASX200 had a strong Wednesday session and that may well follow through into today for us. The S&P continues to defend the 3000 level but the 2 hour chart remains bearish with resistance at 3018. The weekly chart is however still showing 3115 as resistance!
Despite the fact that we are a bit overbought and are also nearing the main daily resistance levels we are holding up pretty well. Fear/greed has dropped back to neutral at 55/100 and as such the bulls could well push this up towards the higher resistance levels.
If the bulls defend this morning then the 200ema at 7540 is the first support to watch with those 2 hour ones below that. However, if they don’t defend these levels then we are still on a path down towards the 7483 25ema daily level, and possibly a bit lower at 7460 where we have the bottom of the 20 day Raff channel.
With the FTSE nearing the main daily resistance area at 7580 to 7620 I am being slightly more cautious with the longs as still favouring a pull back. It just seems to be a bit slow in appearing! That said, should the bulls break 7622 then 7685 is the next daily resistance level to watch.
Data releases today are – UK, EZ & Canadian CPI, US Building Permits & Housing Starts, supply from Germany, ECB’s Coeure
Earnings out today are Netflix, eBay, IBM, Abbott Laboratories, Bank of America, ASML, Ericsson
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