Fed holds | BoJ holds | 5895 support 5955 resistance FTSE 100

Support 5921 5902 5898 5895 5818
Resistance 5954 5955 5959 5978 6028 6133

Good morning. Well we got a bounce yesterday which is more like a dead cat one to be honest, all the way to the 6005 resistance level, before dropping back down towards 5910 this morning. Overnight the Bank of Japan didn’t ease policy as expected and the Fed left rates unchanged (not so surprising) with Yellen seemingly coming around to what her one-time rival, Lawrence Summers, has been arguing for a while: Some of the forces holding down interest rates may be long-lasting and secular. In a press conference after the Fed held policy steady, Yellen spoke of a sense that rates may be depressed by ”factors that are not going to be rapidly disappearing, but will be part of the new normal.” So, in a nutshell, everything is looking a bit dodgy!

US & Asia Overnight from Bloomberg

  • Fed scaled back rate-hike outlook, saying Brexit a concern
  • Kiwi jumps as GDP data damp odds of more policy easing

The yen surged and Japanese stocks extended losses after the nation’s central bank refrained from easing monetary policy. Shares elsewhere in Asia also declined as oil fell for a sixth day, while haven assets including gold and sovereign bonds advanced.

Japan’s currency strengthened past 105 per dollar for the first time since September 2014 and the Topix slid to a four-month low. The MSCI Asia Pacific excluding Japan dropped to its lowest in three weeks as U.S. crude slipped below $48 a barrel. Gold climbed for a seventh day and Australia’s 10-year bond yield fell to a record. The greenback extended Wednesday’s slide after the number of Federal Reserve officials who see just a single rate hike this year rose to six, from one in March.

“The biggest problem of all remains the yen, which can certainly strengthen a little further from here,” said George Boubouras, chief investment officer at Contango Asset Management in Melbourne. “The currency issue will be the one that continues to create the uncertainty and volatility for Japanese equities.”

Japanese stocks are among the world’s worst performers this year, while the BOJ’s negative interest-rate policy adopted in January has failed to curb the yen’s surge. The BOJ’s decision followed the Fed’s Wednesday policy meeting and comes amid turmoil in global markets as a British vote nears on membership of the European Union. Odds of the Fed raising key borrowing costs this year are now below 50 percent, with Chair Janet Yellen saying that the U.K.’s June 23 referendum was a factor in the central bank’s decision to hold rates steady.

About 28 percent of economists in a Bloomberg survey had forecast additional easing at this BOJ meeting, with 55 percent looking to the next gathering on July 29, when the central bank will update its inflation projections.

Stocks

The Topix slid 1.6 percent as of 12:37 p.m. Tokyo time, having been 1.2 percent lower ahead of the BOJ’s announcement. MSCI’s gauge of shares elsewhere in Asia lost 0.6 percent as Hong Kong’s Hang Seng Index slumped 1.8 percent and Taiwan’s Taiex dropped 1.3 percent.

The Shanghai Composite Index was little changed. The measure rallied 1.6 percent on Wednesday amid speculation state-backed funds were supporting the market after MSCI Inc. declined to add mainland China’s equities to its benchmarks.
S&P 500 Index futures slipped 0.2 percent, after the gauge declined for a fifth day on Wednesday.

Currencies

The yen jumped 1.2 percent to 104.81 a dollar, strengthening for the fifth day in a row. The currency gained against all 31 major peers after BOJ Governor Haruhiko Kuroda and his board opted to continue to gauge the economic impact of their negative-rate policy ahead of an election next month.

“The BOJ was facing too much of a headwind in the market,” said Yunosuke Ikeda, head of Japan foreign-exchange research at Nomura Securities Co. “Even if the BOJ had come out with additional stimulus expansion, it would probably not be able to fight this headwind, making such steps ineffective. Ineffective easing would just question their credibility, so they probably decided not to act this time.”The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, fell 0.2 percent to extend Wednesday’s 0.3 percent retreat. Fed officials continue to forecast two 25 basis-point rate hikes this year, after leaving the target range for the benchmark interest rate unchanged at 0.25 percent to 0.5 percent.

The pound maintained most of last session’s 0.6 percent rebound, trading at $1.4191 after gaining on a faster-than-expected increase in U.K. wage growth. The kiwi jumped 0.6 percent, rising for a second day after data showed New Zealand’s economy expanded 2.8 percent last quarter from a year earlier, exceeding the 2.6 percent growth projected by analysts.

Indonesia’s rupiah strengthened 0.4 percent before a central bank policy review, with economists surveyed by Bloomberg predicting borrowing costs will be left unchanged.

Bonds

The yield on Australia’s 10-year bonds was six basis points lower at 2.01 percent, having dipped below 2 percent for the first time. The rate on similar-maturity U.S. Treasuries fell one basis point to 1.56 percent, headed for the lowest close since September 2012.

The yield on Japanese government bonds due in a decade rose one basis point to minus 0.185 percent, after earlier sinking to a record minus 0.21 percent. [Bloomberg]

FTSE 100 Outlook and Prediction

FTSE 100 Prediction
FTSE 100 Prediction

So here we are back at 5910 and yesterdays dead cat bounce has fizzled away. However, the bottom of the 20 day Bianca channel is 5921 and we have a major PRT line at 5898 as well as S1 at 5902. So we may see the bulls try again, fuelled by rates not being risen in the US? However, the 5955 again looks as resistance (it did yesterday but broke through as it really wanted the 6005 level) with the daily pivot and 30min coral both at this level. Worth a short here if seen for the next leg down as generally it still looks pretty bearish. For a small bit of optimism the 2 hour chart is weakly bullish after yesterdays rise with the 100 Hull MA showing support at 5895 so a brave knife catch long here might be worth a go. I can’t see much to really get the bulls excited at the moment especially as we get nearer to the vote, and the remain camp will be liking the negative press about global markets as part of their “Project Fear” agenda. So, once again, similar pattern to yesterday I am thinking with a rise and dip, but probably only as far as 5955 this time.