16th January 2019
Asian markets were mixed in Wednesday morning trade as investors digested a UK parliamentary vote that overwhelmingly rejected a proposed Brexit deal from Prime Minister Theresa May. May’s Brexit deal was rejected by Parliament in a humiliating defeat, her plan for leaving the European Union all but dead. She now faces a confidence vote in her government. The House of Commons voted 432 versus 202 against the divorce the U.K. government brokered with the European Union. A margin of less than 60 would have given grounds to hope that the deal was salvageable, with the EU poised to engage in ways to make it more palatable. Now, more than two years after the nation voted to leave the 28-nation bloc, the U.K. is facing political paralysis over a decision that has divided the nation and its political class for decades. The largest parliamentary defeat in over a century prompted the main opposition Labour Party to pounce with a confidence motion to try to force a general election.
It was a strong day for shares in the U.S and Europe Tuesday. Technology stocks fueled a rally after China ratcheted up stimulus to combat slowing growth. The pound turned higherafter U.K. politicians voted down a Brexit deal. The S&P 500 gained the most in more than a week, rising above the key 2,600 level — which it failed to breach on three occasions last week — for the first time in a month. The tech-heavy Nasdaq 100 recouped two days of losses after China announced more measures to boost its economy, easing concerns about the impact of the trade war. The 10-year Treasury yield traded around 2.71 percent, while the dollar advanced against major peers. The euro dropped after European Central Bank President Mario Draghi said the economy is weaker than expected.
Japan’s Nikkei 225 slipped 0.55 percent, and Greater China markets followed suit, led by Hong Kong’s Hang Seng Index down 0.25% before a midday trading break. The Shanghai Composite was marginally lower by 0.06%.
Korea’s Kospi moved the other direction into positive territory, trending up 0.2%, while Australia’s ASX 200 rose 0.1%
The pound continued a slow, steady rise, hovering around $1.2854 at 4:40 am London time, holding its ground as investors considered the next likely developments and largely avoiding for now the extreme near-term volatility analysts had anticipated.
Investors were previously advised by Citigroup to avoid trading the pound during what was expected to be a tumultuous 24-hour period after the historic Brexit vote.
The pound had changed hands at $1.2849 in early Asian trade, against $1.2871 in New York, while the dollar fetched 108.58 yen against 108.72 yen in New York and 108.69 yen in Tokyo on Tuesday.
Despite Brexit uncertainty, Asian markets were also buoyed as China signalled more stimulus measures to come, including tax cuts and a move to lower the amount of cash banks must keep on reserve, amidst concerns of a slowdown in the world’s second-largest economy.
On Tuesday, sterling tanked to a near two-year low soon after the House of Commons rejected Mrs May’s Brexit plan by a crushing margin of 432 to 202. But the pound quickly bounced back, rallying to stand above $1.28 and erasing more than half of the day’s drop.
But analysts warned against reading too much into the surprise rally, as the huge defeat opened an array of options, including a vote of no confidence called by Labour leader Jeremy Corbyn, to be held at 7pm on Wednesday. Labour leaders have said that if there is not a general election, all options, including campaigning for a second referendum, remain on the table.
FTSE 100 Trading Signals, Forecast and Prediction
For today we might well see a rise initially towards the 6950 resistance area where we have a fib and also the overnight high. Of course we have the no-confidence vote this evening, but I wouldn’t be surprised if May survives that and then we see further upside towards 7000 tomorrow. If May wins can we have a no-confidence vote for Corbyn & Abbot next?! I was a bit too early with the FTSE long yesterday unfortunately as the low was 6850, which we then rallied from. Today looks like more of the same and buying the dip, at least initially seems to be the best plan looking at the 30min chart. We have decent support around the 6885 area, from a couple of moving averages and also the coral line is showing support here. After the rise yesterday the 2h chart has gone bullish (just) and is showing support at 6895.
The first level of resistance is the 6948 level where we have a fib, and the bulls will be keen to break above this to retest the 7002 resistance level that we saw the other day. Above this, 7006 is still showing but 7057 would be the better target if the 7000 area were to break.
The daily chart is still bullish, with support moved up to 6837 now, hence why I am feeling more bullish this week. Of course, a lot of external influences are at play with votes, politics, Brexit etc etc which is why it is more volatile as you know.
So fairly simple plan for today really, looking to buy the dip, either or both at 6887 and 6840 if it were to drop that low, to target 6950 and 7000+
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