Good morning. The big thing for today is that NFP news comes out in the USA today rather than tomorrow so likely to be a little bit lively at 13:30 today. The US is closed tomorrow for Independence Day. Yesterday saw the 6820 hit, the short order take and then a nice rapid drop to 6800 before the bulls came back. But they couldn’t break the daily channels at the 6828 area. The Bianca channel tops have moved up a bit to higher levels since earlier this week reflecting the slow rise we have seen. They are now at 6823 (20 day) and 6832 (10 day). The Raffs have moved up to the 6852 area, a level likely to be seen if 6830 breaks.
Construction Industry (news from todays Telegraph)
Britain’s construction industry took on staff at a record pace in June amid a surge in house-building activity, adding to evidence that the recovery is gaining traction and increasing the chance of an interest rate rise before the end of the year.
Strong demand for new homes pushed up hiring levels at the fastest rate since records began in 1997, according to Markit’s latest survey of the industry. Activity in the commercial sector also remained strong. [read more]
Asia Overnight from Bloomberg
Australia’s currency fell for a second day as the country’s central bank governor said it was overvalued. Asian stocks fell from a six-year high, while the U.S. dollar maintained gains versus major peers, before jobs reports and a euro-area monetary-policy decision.
Australia’s dollar slid 0.7 percent by 1:16 p.m. inTokyo, trading at 93.78 U.S. cents afterReserve Bank of Australia Governor Glenn Stevens said investors are underestimating the chance of currency losses. The MSCI AsiaPacific Index slipped 0.2 percent to 147.2, while Standard & Poor’s 500 Index futures lost 0.1 percent. The Bloomberg Dollar Spot Index added 0.1 percent after rising from a two-month low yesterday. Oil in New York fell a sixth day, its longest slump since May 2012, and platinum slumped 1.2 percent.
The Aussie is more than just a few cents overvalued and the risk of a “significant fall” is being underestimated, Stevens said in a speech today. The monthly payrolls report comes after ADP Research Institute data yesterday showed U.S. employment rose in June by the most since 2012, with more workers hired than economists projected. The European Central Bank meets today after enacting unprecedented stimulus last month, while in Asia, data on services industries is due.
“Stevens’s language is about strong as could be expected without introducing an explicit policy easing bias,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “If the ADP survey is indeed a harbinger of another strong payrolls report, then the U.S. dollar should enjoy a fresh wave of demand and knock Aussie towards 93 cents.”
Jobs
Economists estimate 215,000 workers were added to nonfarm payrolls in the U.S. last month, after an increase of 217,000 in May, according to the median of 94 estimates compiled by Bloomberg. The ADP report had payrolls up by 281,000, after economists predicted an advance of 205,000. Weekly jobless claims numbers are also due today, along with the Institute for Supply Management’s gauge of activity in services industries.
China Services
In China, a gauges of services from the China Federation of Logistics and Purchasing dropped to 55 from 55.5 in May. A HSBC Holdings Plc/Markit Economics measure of non-manufacturing sectors in China is also due today along with gauges for Japan and India and a Markit index of euro-area services. The ECB is projected to keep key interest rates on hold today after cuts last month sent the deposit rate into negative territory.
“The first quarter was weaker than most people expected, but we’ve seen a good rebound subsequently,” Tim Schroeders, who helps oversee $1 billion in equities at Pengana Capital Ltd. in Melbourne, said by phone. “There’s growth in jobs data and the U.S. economy is accelerating, which has positive implications for the market.”
FTSE Outlook
Well it seems the bulls are still in town for the moment and a break above 6830 should reach 6852 today, with the next resistance above that at 6900. I mentioned yesterday that if prices held above 6800 I expect 6900 so I think we will see that. The daily pivot is 6814, so initial support there. As mentioned above the NFP news is out today so could scupper the bulls party, as the FTSE still hasn’t risen to its all time highs despite the strength in the US (and the UK economy).
I am thinking a rise this morning from the pivot to 6852, to coincide with the NFP release. Depending on that we then push for 6900, or drop, and below the pivot the next support if 6750. Worst case 6724, a move below which would invalidate all the rising potentials for the time being and probably start a decline to 6500.
I am going to go for a bit of a contrarian view today, as you can see from the arrows below, with a drop from the 6852 area for my plan. However, if it doesn’t drop from there it will get 6900, and possibly 6944 next – just teasing past the all time high before hitting resistance.
I have gone for the Bianca channels offering the first resistance (and yesterdays high) then the Raffs at 6852 for the next resistance. Of course, i am also treating today a bit like a Friday so using lower stakes and expecting the unexpected!