Quote from Nick on 3rd July 2019, 10:36 am

3rd July 2019

The FTSE 100 rallied to a 10-month high after the pound was sent sliding – making UK shares cheaper for foreign buyers – by Mark Carney warning that trade war and Brexit uncertainty could force central banks to take action.

Sterling neared a six-month low against the dollar and euro after the Bank of England’s Governor admitted that the impact of the uncertainty “may warrant a near-term policy response as insurance to maintain the expansion”. The pound gave up early gains to sink as much as 0.4pc versus the dollar and euro at $1.2583 and €1.1145 respectively. Boosted by its overseas earners gaining following the pound’s latest drop, the FTSE 100 advanced 61.69 points to 7,559.19, its highest level since August 2018. After surging to a record high on Monday, US markets lost their momentum, struggling in flat territory in afternoon trade.

Mark Carney

Mark Carney has warned that rising protectionism could "shipwreck" the global economy and has caused a "sea change" on financial markets. The Bank of England governor said that central banks could soon need to respond with stimulus "as insurance to maintain the expansion".

Mr Carney warned that the global economy has "shifted from a robust, broad-based expansion to a widespread slowdown". His gloomy warning over the global outlook sent the pound sliding back towards a six-month low versus the dollar and euro. The Canadian said fiscal policy may be required to supplement monetary policy if the twin forces of “trade tensions and wider economic policy uncertainties” continue to bite.

Lagarde Succeeds

Christine Lagarde is set to swap the IMF for the ECB, replacing Mario Draghi at the central bank just as the bloc's economy looks in need of fresh stimulus. Investors will likely bet that as a seasoned crisis-fighter, Lagarde will share Draghi’s taste for aggressive and innovative monetary policy. German Defense Minister Ursula von der Leyen was nominated to be the next European Commission head. The selections, which must be ratified by parliament, mark the first female leaders for both institutions.

Havens Are Back

Stocks in Asia look set for modest declines and havens are back in play. U.S. stocks edged higher, as investors surveyed the outlook for Fed policy and trade talks. But the Treasury rally resumed, with 10-year yields down five basis points below 1.98%, and gold jumped back up above $1,400. The dollar fell against most G-10 currencies, with the yen gaining the most.

Oil Plunges

Oil had its worst reaction to an OPEC meeting in more than four years, as a deal to extend output cuts reinforced concerns over a weak demand outlook. Non-OPEC producers including Russia ratified the group's decision to prolong the existing curbs for another nine months. Ministers also signed a charter intended to make long-term collaboration more formal at their joint meeting.

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FTSE 100 Trading Signals, Forecast and Prediction

Gold looks like it might well have bottomed for the moment at 1382 and getting back above 1400 is a good sign for the bulls, and further upside to come. The fear and greed indicator has moved into Greed now for the markets so we may well see some further upside on the indices before it goes back to Fear. As such, the FTSE could get a rise towards 76309 today, though we do have some resistance at 7589 initially.

[caption id="attachment_14916" align="aligncenter" width="821"] FTSE 100 Trading Signals, Forecast and Prediction[/caption]

My longer term charts are also started flagging up 3099 as a resistance area on the S&P yesterday, so that is a level that "may" be seen at some point in the next month or so. Seems a bit fanciful though, but thats what the formula shows! I imagine that would show the FTSE back at that 7700 area where we previously dropped off from.

Support wise for today I am looking at the 7550 area as we have the daily pivot here, and its around previous resistance, now becoming support. If the bears were to break below the 7550 level then we will likely see a drop down to 7497 where we have the key fib and also another test of the 200ema on the 30min chart.  if we were to drop to here then a long looks to be worth a go. That said the sentiment for the moment is bullish, so I don't think we will drop to that area.

We have the US markets closed tomorrow for Independence Day, so we may see some upside then profit taking towards the end of the day today. The means we also may well have a pretty flat day tomorrow on the FTSE.

So for today looking for a rise towards the 7589 resistance initially but also expecting a test of the bigger picture 7630 later on. The ASX200 had a strong rising day today, and cable continues to slide, helping the FTSE 100 bulls.

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