Fed cuts rate again with more QE | FTSE breaks below 5000 | 4950 4850 4800 support | 5350 resistance

Fed cuts rate again with more QE | FTSE breaks below 5000 | 4950 4850 4800 support | 5350 resistance

FTSE 100 live outlook prediction analysis for 16th March 2020

On Friday European stocks made a modest recovery, as Germany and the European Commission pledged more spending in an attempt to combat the effects of the spreading coronavirus, miners were among those leading the charge. The pound had its worst week since the aftermath of the Brexit referendum, falling 3.5pc, the most since October 2016. The S&P 500 has rebounded 9.3pc, its biggest gain since October 2008, while the Dow Jones The Dow Jones surged more than 9pc. It came as Donald Trump declared the coronavirus a national emergency. The tech-rich Nasdaq Composite Index also jumped 9.3pc.

Things continue to move apace, and Sunday night saw the Fed take further action. They slashed its main interest rate by a full percentage point to near zero and restarted quantitative easing in a drastic emergency action hoped to protect the US economy from the worst of the coronavirus outbreak. It also announced coordinated action with other central banks including the Bank of England to ensure the global financial system has access to enough US dollars to stop it from grinding to a halt.  The Fed plans to keep interest rates at rock-bottom “until it is confident that the economy has weathered recent events”.  The second rate cut in less than a week brings rates back to where they stood in the wake of the 2008 financial crisis. The shock action includes a plan to buy $500bn of US government bonds and $200bn of mortgage-backed securities to help banks and other investors weather market disruptions that have made it hard to sell Treasuries. The Fed will also open its discount lending windows to banks and urged them to use it to lend to businesses and households.

The first stock markets to open on Monday reacted negatively to the action, with Sydney plunging another 7pc in early trading.

Stock markets and the dollar were roiled on Monday after the Federal Reserve slashed interest rates in an emergency move and its major peers offered cheap US dollars to ease a ruinous logjam in global lending markets. The drastic manoeuvres were aimed at cushioning the economic impact as the breakneck spread of the coronavirus all but shut down more countries, though they had only limited success in calming panicky investors.

Data out of China also underscored just how much economic damage the disease had already done to the world’s second-largest economy, with official numbers showing the worst drops in activity on record. Industrial output plunged 13.5% and retail sales 20.5%.

FTSE 100 Outlook | Trading Signals | Forecast | Prediction | Analysis

Well here we are and volatility is likely to continue as this very fluid situation continues to play out. We cannot underestimate the global economic repercussions of this virus, the effects of which are going to be felt for a long time. Already China’s figures have fallen through the floor, as industrial output plunged 13.5% and retail sales 20.5%. I expect that to be the similar the world over. Not much of a surprise though.

For today there is initial support at 5136 to start with, and if that area were to hold then I would like to see a rise towards Fridays close and also the red 30min coral at 5400. Feels a big ask when Asia and Australia all dropped, but we shall see. If we don’t get much or any of a bounce here then we are likely to drop fairly quickly down to S2 at 5041 and then the next daily support at 4950. If that breaks then we are going to get very bearish indeed.

For the bulls, I am looking at initial resistance from that coral line at 5400. I really hope that the central banks efforts do yield some fruit and we don’t just continue to slide all day today. Gold moved up on Sunday night but has since dropped away from the 1560 level it tested, and while most of the gold drop recently can be attributed to forced sellers to cover other positions, last nights drop may suggest some index strength coming in. Maybe!

So, stay nimble and remember when its so volatile you can do smaller stakes and reduce the risk a bit. Today I am looking at the 5135 level for initial support, 4950 and then S3 at 4870 below that. Resistance I am looking at 5350, 5400 then 5500. Good luck today.

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