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7409 7460 7490 resistance | 7365 7349 support | Gold breaks $1410 | G20 summit | Iran sanctions | Trading analysis

25th June 2019

The economic outlook for Germany continues to darken as optimism among business leaders hit its lowest level in close to five years. A nine-year run of growth in the eurozone’s largest economy may be at threat after figures from Germany’s Ifo institute showed optimism falling for a third consecutive month.

Its business climate index hit its lowest level since November 2014 at 97.4 in June, down from 97.9 in May. The index, while still in positive territory, has been falling for more than a year. The drop in sentiment among factories to was due to falling order backlogs, the Ifo said, which indicated that the pipeline of work was weakening.

UK

Investors believe that Boris Johnson’s strong lead in the race to become prime minister has ramped up the risk of a disorderly departure from the EU and could even lead to a general election. Mr Johnson has vowed to leave the EU with or without a deal on Oct 31 and analysts are sceptical the front-runner can win enough concessions from the EU to force any agreement through Parliament.

Iran Sanctions

Donald Trump imposed additional sanctions on Iran, including against supreme leader Ayatollah Ali Khamenei, in retaliation for last week’s downing of a U.S. drone. The restrictions would deny Khamenei access to financial resources, as he’s "the one who ultimately is responsible for the hostile conduct of the regime," the president said. Analysts called the move largely symbolic, and Tehran said the new penalties won’t force it to negotiate or capitulate. The hard part will be getting Iran and the U.S. to talk to each other. Trump also blasted China, Japan and others over money the U.S. spends to defend oil tankers in the Persian Gulf.

Stocks Stall

Asian equity futures are slightly lower after U.S. stocks edged away from records as expectations for easier monetary policy vied with concerns about a slowing global economy. Treasuries gained, while the dollar fell against every G-10 peer. WTI crude rose, and gold extended its advance above $1,400. Bitcoin surged above $11,000.

Oil’s Bleak Outlook

Oil’s outlook could be even bleaker than expected. While the Saudi Arabian-led efforts to restrain supply amid surging North American shale production have hogged headlines, a sense of malaise is quietly creeping across Asia. OPEC and its allies would be advised to pay close attention as they prepare to make a key decision on output curbs early next month. With the U.S.-China trade war now almost a year old and showing no signs of ending, its impact is manifesting itself in everything from profit warnings by Japanese car makers to sagging Chinese diesel consumption.


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FTSE 100 Trading Signals, Forecast and Prediction

The FTSE 100 was pretty flat yesterday, though it was a bit unfortunate for my short that it managed to get to 7430 before dropping off overnight. That said, the bulls are trying to defend the 7400 area so we haven't seen that much downside as yet. Cable is also slowly ticking up which is helping to suppress the FTSE 100 at the moment, and fears over oil prices is also weighing on some of the big FTSE 100 constituents. That said, the FTSE 100 is holding up well, and the daily charts are still showing resistance at the 7460 and 7490 areas. Initially however we have a cluster of resistance levels at the 7405 area once again to start with, with the 30min chart appearing to show that we will get a reaction here. The bears will be keen to drop this down below 7400, and the likely target is the 7365 level where we may well see a hold. We have a key fib here too.

[caption id="attachment_14896" align="aligncenter" width="821"]FTSE 100 Trading Signals, Forecast and Prediction FTSE 100 Trading Signals, Forecast and Prediction[/caption]

The 2 hour chart is still bearish, and the coral at 7430 got a reaction yesterday.  However, the daily chart is still bearish and we do look to be heading down to test the 25mea at 7347 currently, and we also have the daily coral here. And the 10 day Raff as well for good measure. As such, a drop down towards this 7350 area I would expect to see a hold and bounce. If the bears were to break below this though then the daily 200ema at 7253 looks likely to be tested.

This week is of course the G20 so we may well have another lacklustre day as we wait for news to trickle out of how that's going. Sanctions, trade wars, actual wars and so on are all at the fore front and keeping traders guessing. Fund managers don’t expect much progress to be made at this week’s meeting between presidents Donald Trump and Xi Jinping, and they’re sticking to their positions. Most China investors see little chance the two leaders will suddenly reach an agreement and resolve a trade dispute that has weighed on markets over the past year. Most are keeping an emphasis on domestic-focused defensive stocks, though much potential downside is already priced in, while foreign-exchange traders expect a slight weakening in the yuan.

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