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Sterling continues its slide | 7069 7150 resistance | 7000 6942 support | Mini budget weighs on markets

#1 · 26th September 2022, 10:00 am

Quote from Nick on 26th September 2022, 10:00 am
FTSE100 Analysis | Signals | Forecast | Prediction | FTSE 100 Outlook | Trading help
On Monday so far, the dollar rallied, bond yields climbed and Asian shares slid amid unrelenting pressure on risk-sensitive assets as fears of faster inflation and global recession continued to rise. The pound led declines among major currencies Monday, slumping as much as 4.7% to a record low as the UK Chancellor vowed to press on with tax cuts that threaten to stoke inflation. The euro fell as investors weighed the prospects of Italy under the most right-wing government since World War II.
Sterling tumbled almost 5pc to as low as $1.0327 in overnight trading, taking it below its 1985 low to the weakest since decimalisation in 1971. It clawed back some ground to about $1.05, but the sharp decline has fuelled fears it could slump to parity by the end of the year. The euro also hit a fresh 20-year low amid recession and energy security fears.
The Chancellor has brushed off questions about the markets' reaction to his mini-Budget – which outlined the biggest programme of tax cuts for 50 years – after it was announced on Friday. The measures, which include scrapping the additional rate of income tax and cutting stamp duty, are aimed at fuelling economic growth. But markets have been spooked amid fears Prime Minister Liz Truss is pushing up public borrowing to unsustainable levels.
Mr Kwarteng rattled traders further yesterday by saying there was “more to come” on tax cuts. The sharp decline in the pound has fuelled expectations of an aggressive interest rate rise by the Bank of England at its next meeting in November.
S&P 500 futures fell 0.5%.
Last week, stocks and bonds crumbled after the United States and half a dozen other countries raised rates and projected pain ahead. Japan intervened in currency trade to support the yen. Investors lost confidence in Britain's economic management.
In Italy, a right-wing alliance led by Giorgia Meloni's Brothers of Italy party was on course for a clear majority in the next parliament, as expected. Some took heart from a middling performance by eurosceptics The League.
Oil and gold steadied after drops against the rising dollar last week. Gold hit a more-than two-year low on Friday and bought $1,643 an ounce on Monday. Brent crude futures sat at $86.29.
Crisis Risk
Asian markets risk a reprise of financial crisis-level stress as two of the region’s most important currencies crumble under the onslaught of relentless dollar strength. The yen and yuan are both tumbling due to the growing disparity between the hawkish Federal Reserve and dovish policy makers in Japan and China. That may swell into a full-fledged crisis if it spooks overseas funds into pulling money out of Asia as a whole, leading to massive capital flight. Meanwhile in the UK the beleaguered pound dropped to a fresh 37-year low against the dollar. Reports at the weekend suggest new leader Liz Truss will face a rebellion from Tory backbenchers against her tax cuts if the pound falls to parity with the US dollar.
FTSE100 live outlook prediction analysis for 26th September 2022
It's all eyes on cable as Sterling continues to tank, and is now almost at parity as expected all those years ago as Brexit played out. The FTSE is just about clinging on to the 7000 level as support, but the Raff channels are heading down steadily as the weak second half of the month continues to play out. Stay cautious with the medium term longs till we get into October.....
So, for today (and probably this week!) we are still looking to short the rallies, and initially I am thinking that a rise towards the daily pivot at 7069 will play out before a drop back down to Fridays low at 6985 and possibly lower - S1 at 6942 looks distinctly possible!
I would then actually quite like to see that S1 level hold if tested as that could then set up a bounce back to 7000, and possibly even higher. It may take a bullish US session to help that along though, and I am looking at the S&P500 defending the S1 at 3640 initially to help with that. If the S&P bulls fail then a drop down to the 3580 area looks likely (maybe tomorrow if not today) as we have the bottom of the Raffs there and also S2 for today.
Above the 7069 daily pivot then we have the key fib at 7127 and 7150 for the 200ema and R1 level - a level that we could see if the bulls were to really kick in a bull Monday session today. At 7150 it gets a little hazier as we also have the 2h coral here, so a break of this would take a fair bit of effort. If done, then 7200 would be the next logical level to aim for as its the round number - seems a big ask today but with cable sliding, that will help the FTSE100 a bit as many constituents in there earn in dollars.
For the bears, a break of 6942 would get pretty bearish and 6900 would likely appear. Below that then S2 at 6854 is on the cards, but we have Raff support at 6931 (20d) and then 6905 (10d). Keep an eye out for these two levels as well.
The ASX200 had a dip and rise play out and we may well do the same today.
Good luck today.
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If you would like more detailed analysis for FTSE100, DAX, Gold and S&P, including the trades that I am looking to take myself, then please join my active members community.
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FTSE100 Analysis | Signals | Forecast | Prediction | FTSE 100 Outlook | Trading help

On Monday so far, the dollar rallied, bond yields climbed and Asian shares slid amid unrelenting pressure on risk-sensitive assets as fears of faster inflation and global recession continued to rise. The pound led declines among major currencies Monday, slumping as much as 4.7% to a record low as the UK Chancellor vowed to press on with tax cuts that threaten to stoke inflation. The euro fell as investors weighed the prospects of Italy under the most right-wing government since World War II.

Sterling tumbled almost 5pc to as low as $1.0327 in overnight trading, taking it below its 1985 low to the weakest since decimalisation in 1971. It clawed back some ground to about $1.05, but the sharp decline has fuelled fears it could slump to parity by the end of the year. The euro also hit a fresh 20-year low amid recession and energy security fears.

The Chancellor has brushed off questions about the markets' reaction to his mini-Budget – which outlined the biggest programme of tax cuts for 50 years – after it was announced on Friday. The measures, which include scrapping the additional rate of income tax and cutting stamp duty, are aimed at fuelling economic growth. But markets have been spooked amid fears Prime Minister Liz Truss is pushing up public borrowing to unsustainable levels.

Mr Kwarteng rattled traders further yesterday by saying there was “more to come” on tax cuts. The sharp decline in the pound has fuelled expectations of an aggressive interest rate rise by the Bank of England at its next meeting in November.

S&P 500 futures fell 0.5%.

Last week, stocks and bonds crumbled after the United States and half a dozen other countries raised rates and projected pain ahead. Japan intervened in currency trade to support the yen. Investors lost confidence in Britain's economic management.

In Italy, a right-wing alliance led by Giorgia Meloni's Brothers of Italy party was on course for a clear majority in the next parliament, as expected. Some took heart from a middling performance by eurosceptics The League.

Oil and gold steadied after drops against the rising dollar last week. Gold hit a more-than two-year low on Friday and bought $1,643 an ounce on Monday. Brent crude futures sat at $86.29.

Crisis Risk
Asian markets risk a reprise of financial crisis-level stress as two of the region’s most important currencies crumble under the onslaught of relentless dollar strength. The yen and yuan are both tumbling due to the growing disparity between the hawkish Federal Reserve and dovish policy makers in Japan and China. That may swell into a full-fledged crisis if it spooks overseas funds into pulling money out of Asia as a whole, leading to massive capital flight. Meanwhile in the UK the beleaguered pound dropped to a fresh 37-year low against the dollar. Reports at the weekend suggest new leader Liz Truss will face a rebellion from Tory backbenchers against her tax cuts if the pound falls to parity with the US dollar.

FTSE100 live outlook prediction analysis for 26th September 2022

It's all eyes on cable as Sterling continues to tank, and is now almost at parity as expected all those years ago as Brexit played out. The FTSE is just about clinging on to the 7000 level as support, but the Raff channels are heading down steadily as the weak second half of the month continues to play out. Stay cautious with the medium term longs till we get into October.....

So, for today (and probably this week!) we are still looking to short the rallies, and initially I am thinking that a rise towards the daily pivot at 7069 will play out before a drop back down to Fridays low at 6985 and possibly lower - S1 at 6942 looks distinctly possible!

I would then actually quite like to see that S1 level hold if tested as that could then set up a bounce back to 7000, and possibly even higher. It may take a bullish US session to help that along though, and I am looking at the S&P500 defending the S1 at 3640 initially to help with that. If the S&P bulls fail then a drop down to the 3580 area looks likely (maybe tomorrow if not today) as we have the bottom of the Raffs there and also S2 for today.

Above the 7069 daily pivot then we have the key fib at 7127 and 7150 for the 200ema and R1 level - a level that we could see if the bulls were to really kick in a bull Monday session today. At 7150 it gets a little hazier as we also have the 2h coral here, so a break of this would take a fair bit of effort. If done, then 7200 would be the next logical level to aim for as its the round number - seems a big ask today but with cable sliding, that will help the FTSE100 a bit as many constituents in there earn in dollars.

For the bears, a break of 6942 would get pretty bearish and 6900 would likely appear. Below that then S2 at 6854 is on the cards, but we have Raff support at 6931 (20d) and then 6905 (10d). Keep an eye out for these two levels as well.

The ASX200 had a dip and rise play out and we may well do the same today.

Good luck today.

Recommended Broker

IC Markets - offers market leading pricing and trading conditions by providing clients with True ECN Connectivity; this allows you to trade on institutional grade liquidity from the world’s leading investment banks, hedge funds and dark pool liquidity execution venues. Highly recommended!

Membership and Live Trading

If you would like more detailed analysis for FTSE100, DAX, Gold and S&P, including the trades that I am looking to take myself, then please join my active members community.

What you get

Daily Analysis pre market open (sent around 7am each day) for FTSE100, DAX40, Gold and S&P500.
Daily email pre market includes my trading plan for the day including ORDER levels, with stops and targets/limits
Telegram live trading room and webinar group membership for discussion and realtime trade updates