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An Asian stock index fell Friday and a dollar gauge hovered near a record high ahead of key US jobs data that could stir expectations for another sharp Federal Reserve interest-rate hike. Asian shares were mixed and the dollar stood tall on Friday ahead of a key U.S. jobs report as investors braced for more aggressive rate hikes from the Federal Reserve, while commodities took an overnight dive amid new China lockdowns.
Drops in Japan and Hong Kong weighed on the region-wide equity index, while China’s bourses were mixed. US futures wavered after Wall Street snapped a four-day losing streak to eke out modest gains.
All eyes are now on U.S. August nonfarm payroll data due on Friday. Analysts expect 285,000 jobs were added last month, while unemployment hovered at 3.5%. Investors may not like a strong number if it supports a continuation of aggressive rate hikes from the Fed, which could further boost the U.S. dollar and spur a sell-off in bonds.
Futures markets have priced in as much as a 75% chance the Fed will hike by 75 basis points at its September policy meeting, compared with a 69% probability a day earlier.
The dollar index, which measures the greenback against a basket of six major currencies, stood near its 20-year high at 109.55 on Friday. It eased slightly against the Japanese yen after notching a 24-year peak against the rate-sensitive currency in the previous session. The dollar was up 0.7% for the week.
Oil prices tumbled 3% overnight before recovering some ground on Friday but were on track to post their worst weekly drop in four on fears COVID-19 curbs in China and weak global growth will hit demand.
Brent crude futures rose 1.3% to $93.56 a barrel on Friday while U.S. West Texas Intermediate (WTI) crude futures were up by a similar margin.
Overnight, the U.S. S&P 500 index climbed 0.3%, while the Nasdaq Composite finished down 0.3%.
In Europe, fears of a recession are on the rise, with a survey showing on Thursday that manufacturing activity across the euro zone declined again last month as consumers feeling the pinch from a deepening cost of living crisis cut spending.
Treasury yields eased slightly ahead of potentially strong payrolls data.
FTSE100 live outlook prediction analysis for 2nd September 2022
It’s Friday with NFP thrown in so always a day to be slightly more guarded. The NFP forecast is 300k, while unemployment is forecasted at 3.5%, same as previously. The FTSE broke below the 7200 level pretty easily in the end yesterday, however the bottom of the 10d Raff Chanel at 7130 held well and saw a decent bounce. The bulls will be keen to keep that momentum going this morning, however it looks like we may well get an initial dip down to the 7122 S1 level (and also the key fib just above this for extra support) to start with today.
The 2h chart remains bearish, while the daily 20d Raff channel is also at 7120 – a level that the bulls will need to defend. A break of this though and it leads down to the 7030 area where we once again test the bottom of the 10d Raff channel and also daily support here. As well as being quite the drop from the recent high – we were at 7550 on 19th August! – it wont do much for sentiment which is already pretty fragile.
The pound continues on its quest for parity with the dollar as well. The looming threat of a recession, acute dependence on foreign capital, soaring debt costs, and the rising likelihood the Bank of England’s independence will be circumscribed are bad news for UK assets, and leave bonds and the currency in an increasingly precarious position.
If the bulls do step up today then a rise towards the 7190 daily pivot is the first key test, and then above this 7215. 7235 is the key fib higher up, with 7290 in play above – the 30m 200ema is here and we may well see the bulls struggle to break this, especially as its Friday. That said, the US can often put in a rally late Friday which may help the FTSE after hours.
Gold dipped below 1700 yesterday as well but has since regained some ground, and we may well see a rise towards the 1717 200ema on that this morning.
S&P500
We had a decent bounce off 3900 yesterday and that has turned the 2h chart bullish for the first time in a while with 3915 support locking in now. Should we get a drop down to this area then a bounce here would fit well, and we are likely to see some volatility today with NFP. Its just testing the red 2h coral for the first time as I write this at 3963 so resistance here, which may well be the catalyst for the drop down to 3915. 3922 is also S1 and the key fib so I would like to see this area hold today. A break of the 3900 though and its likely going to test S2 at 3877. 3400 is resistance above with the R1 and the 30m 200ema in this area, along with the round number. The bulls will be aiming for a decent end to the week I feel.
Good luck today, don’t forget NFP and keep your guard up! Have a great weekend.
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