G20 looms closer | China trade deal is 90% complete | 7430 7460 7490 resistance | 7355 support | Trading analysis

G20 looms closer | China trade deal is 90% complete | 7430 7460 7490 resistance | 7355 support | Trading analysis

26th June 2019

Fears that US tensions with Iran and China will boil over this week have dragged US markets further away from last week’s record high.

The FTSE 100 was the only blue-chip index on European markets to hold its early gains, closing 9.19 points up at 7,416.60. The index was led higher by insurer Admiral after Barclays predicted that it and rival Hastings will benefit most from insurance prices reaching “an inflection point” in the second quarter.

The oil price surge cooled as investors attempted to gauge simmering tensions between the US and Iran. Brent crude slipped back 1.7pc to near $64 per barrel after Donald Trump questioned “why are we protecting” the Strait of Hormuz, the crucial oil artery that has been the epicentre of recent tensions.

The S&P 500 index briefly racked up a new all-time high on Friday before starting a three-day decline. After a flat start to trading this afternoon, the index has dropped to a 0.3pc loss as attention turns to that crucial face-off between Donald Trump and Chinese president Xi Jinping. The two leaders are expected to meet on the second day of the G20 summit following the recent spike in trade tensions.

Consumer confidence in the US has tumbled to its lowest level in almost two years following the escalation in US-China trade tensions. The Conference Board Consumer Confidence index slid to a score 121.5 in June with the much sharper-than-expected fall knocking the gauge down to its lowest level since September 2017. “The escalation in trade and tariff tensions earlier this month appears to have shaken consumers’ confidence,” said Lynn Franco of the Conference Board. She added that consumers, a key driver of growth in the US, gave a “less favorable assessment of business and labor market conditions”.

Set to Delay

The U.S. is willing to suspend the next round of tariffs on an additional $300 billion of Chinese goods while the two sides prepare to resume negotiations at the G-20 summit later this week. The decision may be announced after a meeting between presidents Donald Trump and Xi Jinping, people familiar said. The U.S. won’t accept conditions on tariffs as part of renewed negotiations and no deal is expected from the meeting.

Stocks Drop

Asian equity futures moved lower following a drop in U.S. stocks as comments from the Fed’s Powell and Bullard did little to soothe concerns over growth and trade friction. Tech shares led losses. Treasuries advanced, with 10-year yields below 1.99%. The dollar was mixed, falling against the kiwi and yen while rising against the pound and euro. WTI crude closed below $58. Gold’s rally showed no signs of abating, reaching a six-year high.

FTSE 100 Trading Signals, Forecast and Prediction

As we head towards the G20 summit at the end of the week the markets remain fairly subdued though it was a bit frustrating to have the S&P miss my short order by 1 pint then do a 30 point fall yesterday. The FTSE 100 was pretty flat, hugging the 7400 area and treading water as we head towards the final voting on the Tory leadership candidates. Cable dropped off which is probably the only reason that helped the FTSE stay around that 7400 level.

FTSE 100 Trading Signals, Forecast and Prediction
FTSE 100 Trading Signals, Forecast and Prediction

For today I am still looking at similar levels to yesterday if it’s able to reach them. We have the daily support at the 7355 level, and now also the key fib there for today, with S2 just below at 7343. As such if we were to drop down to that level then I am thinking that we may well see a bounce here, and it is just below the longer term support at the 7365 level. We also have the bottom of the 10 day Raff channel at this area. Should the bears break below 7340 then I am thinking that we are probably going to see 7300 (bottom of the 20 day Raff channel) and probably more likely the 7250 level.

That said, I am also watching for initial support at 7381 today – this level may well hold, but its a bit of a risky one. Worth a long I think but cut quickly if it doesn’t bounce.

Resistance wise, we still have this 7407 level for the 200ema on the 30min, and also the daily pivot here at 7402 – this is alternating between support and resistance as I write this. However, should the bulls push higher this morning, then we would be looking to test yesterdays high at the 7430 level, with the bigger picture resistance at 7448 and 7469 looking likely to be tested. Above this latter resistance level then 7491 still looks attractive for a short.

The longer term formulas are still also showing a possible test of the 7191 level so bear that in mind as a possible destination in the next few weeks.

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