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The FTSE100 – whose exporters are normally boosted by a weaker pound – ended the day down 0.86pc at 7,237.8 points. The pound sank to its lowest level since 1985 amid concern about the Bank of England’s commitment to fighting inflation and Liz Truss’s plans for a borrowing spree. Sterling fell by as much as 1pc to $1.1410, the lowest since 1985, just before major economies signed the Plaza Accord to weaken a surging dollar under Ronald Reagan.
The drop came amid concerns that Bank officials will slow down their efforts to fight inflation as Liz Truss prepares a massive support package that will cut energy bills.
Meanwhile Kwasi Kwarteng, the new Chancellor, told City leaders that he intends to forge ahead with a wave of deregulation dubbed “Big Bang 2”. Treasury ministers also confirmed plans for a new power allowing them to overrule watchdogs that impose unnecessary red tape.
Andrew Bailey, the Governor of the Bank of England, told MPs on the Treasury Select Committee he was “very concerned” about the risk that inflation – which currently stands at 10.1pc – would lead to a prolonged period of higher prices and wages.
But Huw Pill, the Bank’s chief economist, appeared to dampen hopes of steep interest rate rises when he said that the Prime Minister’s expected £2,500 annual price cap would “lower headline inflation”.
An Asian stock gauge rebounded Thursday from the lowest level since 2020, while bonds climbed after Australia’s central bank chief signaled a potential end to jumbo interest-rate hikes. The regional index rose about 1%, paced by Japanese and Australian shares. US and European equity futures made modest gains after near-2% gains in the S&P 500 and Nasdaq 100 on Wednesday.
Japan’s Nikkei share average jumped 1.96% in early trading. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.33%, while Australia’s S&P/ASX 200 gained 0.72%.
All three major Wall Street indices made significant gains overnight.
Chinese blue chips were down slightly, however, after the release of worse-than-expected trade data and extension of a lockdown in the city of Chengdu that demonstrated no let-up in the country’s strict zero-COVID policy.
Markets are awaiting a speech by Federal Reserve Chairman Jerome Powell later today for signs of any let-up in the central bank’s hawkish approach to tackling inflation.
Oil prices recovered slightly from an overnight plunge but remained below $90 a barrel for the first time since early February. U.S. crude ticked up 0.81% to $82.60 a barrel, while Brent crude rose 0.65 to $88.57 per barrel.
Welcome Reprieve
US stocks climbed the most in about a month as Treasury yields halted a surge to multiyear highs, with traders sifting through remarks from a slew of Federal Reserve speakers. A plunge in oil eased some concerns about high inflation and contributed to the drop in bond yields. Futures gained for Japan, Australia and Hong Kong. Fed officials reiterated their determination to get inflation under control. Vice Chair Lael Brainard said interest rates will need to rise to restrictive levels, while cautioning risks would become more two-sided in the future. Chair Jerome Powell is due to speak on Thursday.
FTSE100 live outlook prediction analysis for 8th September 2022
The bears failed to make it stick below 7200 yesterday despite the overshoot of the 7210 support, and the bulls then managed the rise to the 7270 resistance. Having had another go there the bears are on the back foot again as the bulls take the fight to them, and it looks like we may well be on for a push up towards the daily 25ema at 7355 for today.
Both the Raff channels are heading down and the 7355 is pretty key, so the bulls will certainly have their work cut out, though having held up well overnight I am expecting a bullish day. That said, the markets are waiting for Powells speech later, and that may have an effect on the S&P500. At the moment that also looks bullish with the 2h chart showing decent support at the 3910-3920 area (and is bullish currently).
Initial FTSE100 resistance is at the 7281 level where we have the key fib, then 7287 just above that for R1. An early push at the bell could well stall here as overnight longs take their profits for a drop down to the pivot and green 30m coral at 7235 before another leg up. The ASX200 was bullish today and I expect that we may well do the same.
Above R1 then 7333 is the daily 200ema, and just above R2, then the 7355 as mentioned.
Support wise, daily pivot and coral at 7235, then below that 7178 is the key fib, though 7199 is S1 – not sure it will get back down below 7200 today as I would like to see that 7235 level hold, at least initially.
7355 may well see some swing shorts coming in, and in fact the S&P500 could rise to test the 25ema on its daily chart at the 4045 level and those two may well align for swing shorts on both. Ergo, keep an eye on both these price levels.
S&P500
We also have a double top area on the S&P at 4019 to look for as well – and with R1 at 4017, the bulls will need to break this level today. As with the FTSE, both the Raff channels are heading down, but the bulls are certainly trying to push it up at the moment. Though we may well see it stall at the 4045 25ema on the daily – as we do often see a weaker second half of September, historically. See this chart here
So, let’s see if we get a dip and rise play out today and keep an eye on all the key levels. Good luck today.
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