Dip and rise today but cable in the driving seat | 7279 7240 support | 7320 7340 resistance | Trading analysis

Dust settles and a rise to 7635 on the cards | 7570 support | NFP tomorrow - buy the rumour

9th September 2019

European markets closed broadly flat on Friday, with Germany’s DAX putting in relatively-healthy growth of 0.54pc as the continent’s other blue chips looked immovable. Mixed news prevailed from a markets perspective: although German factory data in the morning showed the factories in Europe’s biggest economy slipping deeper into disaster, the damage was offset by continued expectations that Berlin will soon intervene to re-stimulate Europe’s largest economy.

The trade war between the US and China stayed on ice as the countries prepare for as-yet-unfixed talks next month.

It was the quietest day of the week for Brexit as well, with the passage of a bill to block a no-deal Brexit passed through the House of Lords, and opposition parties settled on plans to refuse Boris Johnson a General Election until the measure enters law.

Sterling stayed low through the day, giving back some of its rapid gains from Wednesday and Thursday, as traders weighed up the seemingly-likely outcomes of a no-deal Brexit or a Jeremy Corbyn-led government. That gave little support to the FTSE 100, which closed the day flat.

Tariffs & Stimulus

China’s exports unexpectedly contracted in August, with sales to the U.S. tumbling amid the escalating trade war between the two nations. Exports decreased 1% in dollar terms from a year earlier, while imports declined 5.6%, leaving a trade surplus of $34.84 billion, the customs administration said Sunday. Economists had forecast that exports would grow 2.2%, while imports would shrink by 6.4%. Shipments to the U.S. fell 16% from a year earlier. Meanwhile, China’s central bank said Friday it will cut the amount of cash banks must hold as reserves to the lowest level since 2007, injecting liquidity into an economy facing both a domestic slowdown and trade-war headwinds.

Market Open

Asia equity markets begin mixed with the region cautious as it digests the latest developments from both US and China including US NFP miss, PBoC RRR cut and mostly softer than expected Chinese trade data. U.S. stocks and the 10-year Treasury yield were little changed Friday as Fed Chairman Jerome Powell’s last speech before next week’s policy meeting cemented views for another rate reduction. On the data docket, Japan’s GDP and current account are due Monday. China’s CPI is Tuesday. There is an European Central Bank decision on Thursday. U.S. CPI also out Thursday. British politics will continue to be in the spotlight as parliament may be suspended and a general election could be triggered.

Boris Johnson

Boris Johnson will press on with his plan to deliver Brexit by Oct. 31, senior ministers said, despite defeats in Parliament and the sudden resignation of Work and Pensions Secretary Amber Rudd with a furious attack on his leadership. Rudd’s resignation plunged Johnson’s six-week-old administration deeper into turmoil after a dramatic and disastrous week in which members of Parliament voted against a no-deal divorce then refused to grant him the emergency general election he wanted.

FTSE 100 Trading Signals, Forecast and Prediction

Having climbed well from just below the 120 level cable has faltered at 12350 and dropped back a bit, as such we may we may well see that help the FTSE bulls in the short term, however, while there isn’t yet a locked in sell signal on the FTSE 100, we are getting near to some key resistance. I was thinking 7450 for the end of August/early September rally, but we might falter below that at the 7350 area or just below. We have the 7330 to 7338 area showing as resistance on a few indicators so I am watching this area closely this morning.

FTSE 100 Trading Signals, Forecast and Prediction
FTSE 100 Trading Signals, Forecast and Prediction

We may well get an initial drop down to close the gap with Fridays closing price at 7282 and we also have the daily pivot and the 30min coral here for support at 7271 we have the 200ema on the 30min so I am expecting the support in this area to hold this morning. We may well get a dip and rise play out as a bit of bull Monday kicks in. Of course, Westminster might throw a spanner in the works with the plan so still keep watching the news feeds for that.

With the bullishness on Friday, the 2 hour chart has gone bullish, and has support initially at 7301, but also has resistance at 7307 – so not a very clear picture on that time frame, however on the daily we are back above the 200ema so support initially at 7291 from that, but then also coral resistance at 7340. So basically there is a pretty tight range in play, it could break either way, and there is a lot of treading water going on with the FTSE at the moment (understandable really!).

Should the bears break below the 7271 then a drop down towards 7240 and possibly 7213 looks likely. I am also looking out for the bears to properly appear this week or next on the FTSE just so you are aware. But waiting for a clearer signal.

On the other hand, if the bulls were to break above the 7340 level today then I am expecting a test of the 7400 level as its the round number, but also the top of the 20 day Raff channel at 7420. The 10 day Raff channel continues to head up, and resistance from that is at 7490 while support is at 7250 (hence why I still have a short term bullish bias).

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