FTSE 100 Outlook and live trading | 7175 7250 resistance | 7120 support | Brexit no deal back on

Markets rattled by trade again | SPX finally drops | 7240 7197 support | 7355 resistance

FTSE 100 Outlook for 9th October 2019

  • Pound falls to one-month low against the euro on reports PM told German Chancellor Brexit deal is “essentially impossible”
  • Productivity slowdown fears after output per hour fell by 0.5pc in second quarter as UK economy contracted
  • FTSE falls slightly as European shares slide ahead of US-China trade talks
  • Recruiters knocked as global economic fears prompt hiring slowdown
  • Hong Kong bourse scraps £32bn bid for London Stock Exchange

The pound sunk to its lowest level against the dollar and euro in more than a month on Tuesday, after an apparent breakdown in Brexit talks. The currency fell below $1.22 during the session, sharply sinking after No 10 sources said Angela Merkel, the German chancellor had described the prospect of a deal without Northern Ireland remaining in the Customs Union as “overwhelmingly unlikely”.

Reports from the BBC and Sky said Boris Johnson, the Prime Minister, claimed the demand meant a deal was “essentially impossible”.

Initial reports knocked sterling, with the losses extending during the session after the German government refused to offer its own description of what had taken place on the call. Mr Johnson has repeatedly described the Oct 31 Brexit deadline as immutable, but his hands are tied by the Benn Act, which requires the Government to seek an extension if it cannot reach a Brexit deal by the end of next week.

Sterling has tended to weaken amid no-deal chatter in recent weeks, and strengthened whenever the Prime Minister suffers setbacks. Jefferies analysts said a no-deal Brexit would push sterling down to its weakest levels since the mid-Eighties.

The pound’s slide offered some crucial support to the FTSE 100, as most bourses retreated on fears over Brexit and worries about the impending trade talks between the United States and China. The blue chip index nonetheless closed down 54.7 points, or 0.7pc, at 7,143.2, but outperformed Continental benchmarks such as Frankfurt’s Dax and the Paris CAC 40, which both closed more than 1pc down. The Europe-wide STOXX 600 dropped 1.1pc on a day that saw basic resource firms, tech companies and manufacturers suffer.

Markets to Drop

Stocks in Asia looked set to decline following a drop in U.S. equities and gains for sovereign bonds Tuesday amid concern that U.S.-China tensions are growing just days before high-level trade talks are due to take place. The S&P 500 Index sank 1.6% after the news of U.S. travel bans on Chinese officials linked to the mass detention of Muslims in Xinjiang province, which came after China said it strongly opposed a U.S. move to blacklist some of its technology firms and Bloomberg reported the White House is moving ahead with discussions about restricting capital flows to China. The yuan dropped in offshore trading. Ten-year Treasury yields fell to 1.53% and the dollar edged up after comments by Federal Reserve Chairman Jerome Powell that the central bank will seek to calm money markets without QE. Elsewhere, the pound weakened after Boris Johnson told German Chancellor Angela Merkel a Brexit deal is essentially impossible. Meanwhile, West Texas crude fell toward $52 a barrel.

It’s Not Quite QE

Federal Reserve Chairman Jerome Powell said the central bank will resume purchases of Treasury securities in an effort to avoid a repeat of recent turmoil in money markets, while leaving his options open on interest rates weeks ahead of policy makers’ next meeting. But it’s not QE, he said. “Neither the recent technical issues nor the purchases of Treasury bills we are contemplating to resolve them should materially affect the stance of monetary policy,” he said said in a speech to the National Association for Business Economics in Denver. He suggested that the purchases would be made up of Treasury bills and stressed the buying should not be seen as a return of the crisis-era quantitative easing programs that the Fed engaged in a decade ago to boost the economy.

FTSE 100 Outlook | Trading Signals | Forecast | Prediction

The general malaise on global markets saw the FTSE 100 drop down to a low of 7135 yesterday but the bulls have fought back a little bit from there. The 2 hour chart remains bullish though and is still showing support at the 7121/7129 area so if we were to drop down to here I am thinking that this area will see a bounce. That might well tally with the S&P dropping a bit further down to its next major support at 2879, and also the 200ema on the daily at 2875. So we might see a dip and rise play out on both of those today.

FTSE 100 Outlook | Trading Signals | Forecast | Prediction
FTSE 100 Outlook | Trading Signals | Forecast | Prediction

Should the FTSE bears break below 7120 then it starts looking quite bearish, as we have the 20 day Raff channel bottom at 6961 and an area that we may well see. Brexit deadline is getting closer, the adverts in the media are ramping up telling everyone to prepare for the 31st October deadline (an indicator that we are definitely leaving then?) and yesterday saw the spat between the EU and Boris, with talk of a deal being “impossible”. Or is it?

Resistance wise, we have the 30min chart showing initial resistance at the 7170 area with the daily pivot and the coral line here (which is red now) and then also the 200ema just above this at 7179. As such, we may well see an initial drop off this level down to that support. Should the bulls break above the 7180 level then a rise towards 7212 is most likely, and then the daily resistance levels are also back in play at 7250 above that. Should we get this high then I am still thinking that a short here is worth taking.

We have a 9.5 dividend today as well which should help the FTSE 100 outlook.

Could be an interesting day, and watching that 7120 level closely. S&P has dropped of its daily resistance nicely now at 2955, however the FTSE hasn’t touched its one yet, and with it not really that far away at 7250 a test of it still looks possible.

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