Quote from Nick on 10th July 2019, 8:47 am

10th July 2019

Tuesday in a nutshell:

• Pound slips below $1.25 as investors price in the possibility that the Fed will hold rates steady
• Sterling trading at levels last regularly seen in 2017 as investors weigh possibility of no-deal Brexit
• FTSE 100 falls after recovering early losses

Sterling suffered a torrid day, sinking to lows against the dollar not seen for more than two years apart from a "flash crash" in January. The pound slipped below a key level of $1.2455 - just short of the low record in April 2017. Economists are divided over whether the slide was triggered by weak retail data from the British Retail Consortium showing that retail sales fell sharply last month.

The drop, the sharpest recorded since records began in the mid-1990s, compared to a period which included the World Cup last year, leading some to question whether data was distorted as a result. Nevertheless a slew of relatively weak UK economic data was part of the pressure on the pound on Tuesday.

First Contact

American officials have spoken on the phone with their Chinese counterparts, marking the first high-level contact after their presidents agreed to resume trade talks last month. U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin spoke to Chinese Vice Premier Liu He and Commerce Minister Zhong Shan on Tuesday. Both sides will continue these talks as appropriate, a U.S. government official said, without offering more details on the next steps. White House economic adviser Larry Kudlow characterized the discussion as “constructive,” and said officials are planning more meetings but that no details have been confirmed.

Fed

Jerome Powell and company largely avoided discussing Fed policy a day before he lays out his views on rates and the economy before Congress. The central bank chief and Vice Chairman Randal Quarles defended efforts to make its annual big-bank stress tests more transparent. Philadelphia President Patrick Harker told the WSJ that he sees no need to move rates in any direction. Larry Kudlow says Powell's job is safe, for now. "There is no effort to remove him," the White House economic adviser told CNBC.

Stocks Mixed

Asian equity futures are mixed after U.S. stocks pulled higher at the close, with help from tech shares. The markets are also braced for Powell's testimony. Treasuries were largely flat, though 10-year yields advanced a tad. The dollar rose against its G-10 peers, with the Aussie faring the worst, while the Mexican peso dropped after that country's finance minister quit. Oil climbed and gold was little changed.

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FTSE 100 Trading Signals, Forecast and Prediction

The weakness has returned and the bulls failed to push above that 7550 level but we have held relatively stable overnight. As such the 30min chart is bullish (weak though) to start with today and has support at the 7537 level where we have the daily pivot and also the green coral support. I am looking at a rise towards the 7580 level and this level looks to be a decent short as I have a few things showing resistance here. First time for a while that a few things are aligned on the FTSE for a decent signal level. Ergo, if we rise to 7580 then I am liking a short here. Should the bulls break above this level then 7622 and possibly 7685 are back in play.

[caption id="attachment_14928" align="aligncenter" width="821"] FTSE 100 Trading Signals, Forecast and Prediction[/caption]

If the bears break below 7537, then I am looking at fairly decent support at the 7480 level but am also mindful of 7456 below this where we have the as yet untested 25ema on the daily chart. Below this then 7369 is the daily coral. I am thinking though that if we were to drop to 7480 (and maybe driven by a dead cat bounce on cable from its lows) we may see a bounce here as we have S3 and a key fib here.

The 2 hour chart remains bearish with near term resistance at 7550 and then the 7579 level above that. As such the bulls will need a fair bit of oomph to get though 7550 to test that lower level (again, maybe cable will help out with this). The FTSE has actually been fairly static this week with quite small ranges in play during each session. We may see that again today as investors await clues on policy from Federal Reserve Chairman Jerome Powell this afternoon. We also have the Fed minutes at 7pm today. Everyone looking for clues on US interest rates.

Todays dividend is a tiny 0.14 so won't have much bearing on the bulls later.

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