Fed cuts rates 25bps | 7300 7260 support | 7358 7435 resistance | End of month profit taking

Fed cuts rates 25bps | 7300 7260 support | 7358 7435 resistance | End of month profit taking

FTSE 100 Outlook and Analysis for 31st October 2019

The US central bank stepped up its attempt to stave off recession by cutting interest rates for a third time this year, as fresh economic data showed shoppers shored up the American economy in the third quarter.

The Federal Reserve’s policymakers voted to trim rates by 25 basis points to 1.75pc.

But they dropped a pledge to “act as appropriate to sustain the expansion” in a signal to markets that it could hesitate on further action. Fed chairman Jerome Powell indicated that rate-setters will now sit on their hands unless the economy deteriorates further, calling the latest cut “insurance against ongoing risks”.He dashed expectations on Wall Street of further stimulus, by arguing that US households have been “resilient” and that risks to the economy are declining.  The move risks infuriating Donald Trump. The US President has repeatedly attacked Mr Powell for not pursuing a more dovish monetary stance.

Mr Powell pointed to the breakthrough in US-China trade talks and the reduced risk of a no-deal Brexit as fading threats to the economy. Financial markets were largely unmoved by the widely expected cut, with US stocks little changed during the day’s trading.

The Fed took action despite fresh GDP growth data suggesting that the US economy is holding up against intensifying headwinds from the trade war and a darkening global outlook. Growth slowed to 1.9pc on an annualised basis compared to the previous quarter, down from 2pc, as solid consumer spending offset a 3pc drop in business investment.  However, economists warned of a gloomier outlook for US growth in the coming quarters, predicting that the slowdown will accelerate in the fourth quarter.

Third Cut

“We believe monetary policy is in a good place.” That’s what Federal Reserve Chairman Jerome Powell told a news conference after officials reduced interest rates by a quarter-percentage point for the third time this year, signalling a pause in further cuts unless the economic outlook changes materially. The Federal Open Market Committee altered language in its statement following the two-day meeting, dropping its pledge to “act as appropriate to sustain the expansion,” while adding a promise to monitor data. They cited the implications of global developments in deciding to lower the target range for the central bank’s benchmark rate to 1.5% to 1.75%.

Markets

Stocks in Asia were mixed after U.S. equities rose to a fresh record high following the Federal Reserve’s decision to cut interest rates and indicate it is unlikely to move in either direction any time soon. Treasuries gained and the S&P 500 turned higher when Powell said rate hikes won’t occur as long as inflation remains persistently cool. The offshore yuan climbed. After the close of trading, Apple and Facebook advanced after posting results. The yen was steady ahead of the Bank of Japan’s policy decision.



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

The reaction was fairly muted to the news from the Fed, however the S&P and FTSE have held up well, though again the FTSE failed to test that 7358 resistance level. As you can see from the list there are still a few relevant resistance levels around that area so if we get an initial kick up towards the 7360 level I am thinking that we may see a bit of a drop back from there. Above the 7369 fib level we have the top of the 20 day Raff channel as the main level to watch, at 7435.

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

Initial support is at 7324 where we have the 30min coral and then the daily pivot just below that at 7317. We also have the 200ema on the 30min at 7307 and with the rise yesterday the 2 hour chart has gone bullish. We still haven’t dropped down as far as the main daily support yet, but that is now at 7260, again, if we drop that low then a swing long here still looks viable. Daily support for the S&P has risen to 2995 as well now, so again, a long here is worth a go. Probably not going to drop there today though.

If we do get an early drop down to the 7307 support level and it holds then we may well see a decent push higher from here. We also have the bottom of the 10 day Raff channel at 7298 and with both the 10 and 20 day Raff channels heading upwards the bias is still long for the moment. That said, we are getting to the greedy stage in the markets now, with the indicator on 75/100 and extreme greed so we may well see a turn at some point soon. That said, the bulls are still in the driving seat for the moment.

Recommended Broker


IC Markets – offers market leading pricing and trading conditions by providing clients with True ECN Connectivity; this allows you to trade on institutional grade liquidity from the world’s leading investment banks, hedge funds and dark pool liquidity execution venues. Highly recommended!

Membership and Live Trading

If you would like more detailed analysis for FTSE 100, DAX, Gold and S&P, including the trades that I am looking to take myself, then please join my active members community.

What you get

  • Daily Analysis pre market open (sent around 7am each day) for FTSE, DAX, Gold and S&P.
  • Daily email pre market includes my trading plan for the day including ORDER levels, with stops and targets/limits
  • Telegram live trading room and webinar group membership for discussion and realtime trade updates

Keep up to date with new content, free sign up below