Quote from Nick on 27th August 2019, 4:02 pm

27th August 2019

Well that was a lively Bank Holiday Monday, as the FTSE futures went below 7000 then rallied back to 7100 as trade rhetoric swung both ways. I hope you enjoyed the long weekend anyway!

Meanwhile, German business confidence has sunk to its lowest level in nearly seven years according to a closely-watched measure, as the country’s ailing manufacturing sector drags it to the brink of recession. Europe’s biggest economy is struggling as its export-reliant manufacturers feel the impact of global trade headwinds, which sent it into a 0.1pc contraction during the last quarter.

The latest figures from the Ifo Institute’s business climate index, released today, showed confidence slid for the fifth month in a row during August to reach its lowest level since November 2012, falling from 95.8 to 94.3. A handful of German industrial giants have cut their forecasts as trade worries escalate. The Ifo’s report said manufacturing outlook “has yet to hit a floor”, with expectations hitting their lowest levels since the financial crisis. The German government has indicated it is looking into finding ways of stimulating the economy through investment.

‘They Want to Make a Deal’

After days of escalating tensions, U.S. President Donald Trump said China wants to make a trade deal “very badly.” U.S. stocks rallied on the president’s optimistic comments. “The tariffs have hit them very hard,” Trump said of China during a press conference from the Group of Seven meeting in Biarritz, France. China’s top trade negotiator, Vice Premier Liu He, said: “We are willing to solve the problem through consultation and cooperation with a calm attitude,” according to a Caixin report. “We firmly oppose the escalation of the trade war.” Trump noted Liu’s call for “calm,” saying “I agree with him.”

U.S. Stocks Rally

Asian stocks gained at the open Tuesday amid a more conciliatory tone from US President Trump and after all three main U.S. equity indexes climbed in thin trading. Gains arrived thanks to comments from Trump and French President Emmanuel Macron, who also said things were moving forward between the U.S. and China. The broad-based equity rally was led by tech shares, especially semiconductor stocks. The dollar strengthened and 10-year Treasury yields held close to a three-year low. Asian equities are set to open higher. The trade war’s latest twists and turns punctuated an already tumultuous August, with markets buffeted by signs of slowing global economic growth and violent protests in Hong Kong. Regardless of Monday’s developments, the risk of U.S. recession may have crept higher after Trump announced fresh levies on Chinese imports Friday.

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FTSE 100 Trading Signals, Forecast and Prediction

The bulls fought back yesterday as the trade narrative gave signs for a bit of optimism and the 7000 level was defended. For today we have initial support at the 7070 level, with the 7030 S1 and fib level for support below this. If it goes full bearish again then a drop down to the recent low at 7000 looks likely, and a retest of that daily 7010 support level. We have a green 30min coral to start with today which tallies with the pivot level at 7070 so it will be interesting to see if this holds initially. The 2 hour chart is bullish but weak, and has resistance from the coral at 7123, but we are below the support level of 7093, so the moving averages on this could easily go bearish again.

[caption id="attachment_15028" align="aligncenter" width="821"] FTSE 100 Trading Signals, Forecast and Prediction[/caption]

If the bulls do push on then there are also a few other resistance levels at that 7120 level - a key fib and also the 200ema on the 30min chart. As such we may well see an initial stutter here, and a bit of a drop back. The bulls however will be keen to push past this as it opens up a test of the 7168 and 7190 levels. We still haven't tested the 25ema on the daily chart which is still relevant resistance at 7238 for the moment, though that's maybe a big ask for today.

Very cautiously bullish for today and looking for a rise towards the 7120 level if 7070 holds initially. Otherwise I am thinking that we drop down to test yesterdays lows on the futures at 7000 and a long at 7010 is probably worth a go. Watching the trade narrative at the moment as that is what is driving things, coupled with cable climbing from its recent lows at 12050.

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