31st July 2019
Major European indexes dropped yesterday afternoon after Donald Trump fired the latest salvo in a war of words with China. The US President appeared to accuse the Chinese of reneging on crop-buying commitments, spooking traders and pushing the top continental bourses down by 1.5–2pc. The FTSE held flat at 7700 despite big share price drops for Fresnillo and Centrica, with a weakening sterling underpinning gains.
The pound has fallen further as markets absorbed increased talk of a no-deal Brexit. Sterling is hovering around 28-month lows against the dollar, after Cabinet ministers ramped up warnings that a no-deal outcome on 31st October appeared increasingly likely.
Boris Johnson has called the exit date a “do or die” deadline, but tried to offer reassurance that reaching an arrangement with the EU remained the most likely outcome. His words didn’t stop the slide in the pound’s value, which reached a low of $1.2122 this morning. It hit two-year lows against the euro, with a longer-term drop having accelerated since Mr Johnson entered Number 10 last week.
Boris Johnson said it’s “up to the EU” to compromise on a Brexit agreement and avoid a no-deal divorce. “If they can’t compromise, if they really can’t do it, then clearly we have to get ready for a no-deal exit,” he said, reiterating that Britain won’t accept an Irish backstop. The U.K. prime minister is expected next week to commit hundreds of millions of pounds on hospitals and health care technology, as he seeks to deliver on his own most contentious political promise, a person familiar said.
President Trump slammed China on the day his trade team arrived in Shanghai, accusing it of continuing to “rip off” the U.S. He tweeted: “China is doing very badly, worst year in 27—was supposed to start buying our agricultural product now—no signs that they are doing so.” He added: “That is the problem with China, they just don’t come through.” His tweets came just as the two nations resumed negotiations following a three-month breakup.
Asian equity markets followed suit to the negative performance seen across global peers amid trade concerns, looming FOMC decision, mixed Chinese data and earnings.
News highlights include German Retail Sales & Unemployment Change, EZ CPI (Flash), GDP (Prelim) & Unemployment, Canadian GDP, FOMC Rate Decision & Press Conference, CBRT Inflation Report & Meeting Summary, supply from Germany, with the Fed off course being the big one this evening. Will they or won’t they cut rates. 7pm this evening for that.
FTSE 100 Trading Signals, Forecast and Prediction
As I expect you are aware today’s big event is the FOMC rate decision at 7pm this evening and as such we may well have a bit of a choppy day. It looks like we will see a 25bps rate cut, so it will be interesting to see what is actually announced – that or more. Despite Trump’s insistence that they do cut more they may well go for the small cut – keeping their powder dry for when the economic data isn’t as good as it currently is. A 25bps cut is probably priced in now on the US markets and we saw a solid defence of the 3000 level on the S&P yesterday.
The FTSE dropped back yesterday from the 7720 level and steadily dropped all day, retracing Monday’s rise, as cable fell further towards the 12100 level. As a result the FTSE 2hr chart is now bearish again, with 7669 as Hull moving average resistance to start with this morning. Above this then the 7708 level is still showing on the daily, and we also have R1 here today, with the key fib just above this at 7716. Depending on the rate news later , if we push higher and break this area then the recent high at 7730 is next up, with 7769 (R2) and 7808 (R3) the next levels to watch.
Meanwhile, on the support side of things, it looks like we may well get an initial rise this morning, but maybe not very far. There is decent looking support at the 7615 area where w have the 200ema on the 30min, and also a key fib, with S1 at 7608. As such a long at this level is worth a go, for a rise ahead of the Fed – buy the rumour sell the news might well pan out this afternoon on the US markets. We could see the S&P rise towards the 3023 and 3030 levels. 3126 is still showing on the weekly charts as a possible area of interest as well.
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