Fed alludes to rate cut | 7560 7580 7622 resistance | 7530 7460 support | S&P500 3000 | Trading analysis help

Lower support 7110 tested - can it hold for a rise towards 7300 | Fed minutes this evening | 5.6 divi

11th July 2019

Wednesday highlights:

  • Federal Reserve chair Jerome Powell said the he was ready to “act as appropriate” to sustain economic expansion
  • Remarks bolster expectations of an interest rate cut later this month
  • UK economy returns to growth in May as car production increases following April shutdowns
  • Sterling mounting a recovery after falling to a two-year low yesterday

Britain’s economy is set to avoid shrinking in the second quarter of the year following a modest return to growth in May.  Output rose by 0.3pc in the three months to May, according to the Office for National Statistics. It expanded by the same amount compared to April, when shutdowns at car makers and other no-deal hiatus dragged activity into negative territory, curtailing overall GDP by 0.4pc. Manufacturing rebounded by 1.4pc in May compared to a 4.2pc drop the previous month.

European indices were also broadly positive, catching a tailwind from Powell’s comments, although the Dax was weaker. The dollar softened, helping GBPUSD rise north of 1.25, but the persistent drag from Brexit seems to be constraining any real rally.

The London benchmark index ended slightly in the red, falling 5.78 points to 7,530.69 while the FTSE 250 closed 0.25pc lower at 19,419.38. The majority of European stocks ended in the red.

The fall comes despite Federal Reserve chair Jerome Powell saying that he was ready to “act as appropriate” to sustain economic expansion and suggesting that the central bank is likely to cut rates this month.

Meanwhile stocks on Wall Street traded higher, with the Dow Jones, S&P 500 and the tech-heavy Nasdaq all in the green. The S&P 500 index climbed as much as 0.77pc to 3,002,  crossing the 3,000 threshold.

Fed Cut Cometh

Jerome Powell telegraphed his intention to lower borrowing costs as soon as this month, telling the House that risks from the trade war with China overshadow the healthy labor market. Asked if June’s stronger-than-expected jobs report had changed the central bank’s thinking, the chairman said: “A straight answer to your question is, no.” The Fed chief said also Donald Trump lacks the authority to fire him. When asked if he would leave if the president told him to, he said: “Of course I would not do that. My answer would be no.”

S&P hits 3,000 in hours

Asian equity futures are mostly higher after U.S. stocks hit all-time highs on Powell’s dovish comments. The S&P 500 briefly rose above 3,000 for the first time.  Treasuries were mixed, with 10-year yields dropping then recovering to hold at about 2.06%. The dollar lost ground against almost every major currency, and gold jumped more than 1%.

FTSE 100 Trading Signals, Forecast and Prediction

Interesting looking chart to start with today as we have resistance at the 7560 level which was yesterdays high, and also have the 2 hour coral here at 7555. Above this then the 7580 level is still showing as resistance and still looks good for a short. Above this then 7622 is the next level to watch. The US has made new record highs, and Australia’s stock market could soon reach a new all-time high, with the S&P/ASX 200 just short of its record from 2007. The nation’s benchmark has surged 18% this year, adding about $210 billion in value despite a sluggish economy and a housing slump. The FTSE100 however has been weighed down by Brexit.

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

On the support side of things, the 2 hour chart has gone bullish with the 7530 level becoming support looking at the moving averages, no doubt helped by yet another fairly flat day on the FTSE yesterday. We also have the bottom of the 10 day Raff channel at 7518, with both that and the 20d still heading up.

Cable has found a bit of short term support at the 12450 level and with the MSM spouting about the lows on that I expect we will get a couple of positive sessions still. 12650 is the resistance level to watch for the moment.

For the FTSE 100 today I am thinking that we get an initial small dip down to that 2 hour support at 7530 then a climb back during the rest of the session, but the bulls will need to break the 7580 level. As such, we may well see some bearishness there and its possible that we have another range day between 7530 and 7580.

Todays news highlights include, ECB minutes, US CPI, weekly jobs, OPEC monthly report, Fed Chair Powell’s testimony to the Senate (text 1330BST, hearing 1500BST), Williams, Barkin, Bostic, Quarles, Kashkari, ECB’s Coeure, supply from Italy and the US

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