May survives the vote | 6916 resistance 6863 support | ECB asset purchase and rates | analysis | education

Dust settles and a rise to 7635 on the cards | 7570 support | NFP tomorrow - buy the rumour

13th December 2018

Well that was a day and a half. May has survived the no confidence vote, 200 conservative MPs said they did have confidence in Theresa May as leader of the Conservative party, while 117 were against. She has a majority of 83. The ERG can’t challenge again now for 12 months, though she has said that she won’t lead the tories into the next election.  May’s enemies can’t try again to oust her as party leader for at least a year, but the result shows that more than one in three of her own colleagues do not want her to be prime minister. In an emotional concession during a private meeting with her critics, she said she knew deep down she would not be leading them into the next election in 2022, according to people in the room. The pound held its gains as Asian stocks had a muted start to trading.

The pound retreated from a high of 1.2691 to trade at 1.2606 in the immediate aftermath of the confidence vote, which saw Theresa May survive with a majority of 83. Ahead of the vote more than half of Tory MPs had publicly backed the Prime Minister.

Earlier in the morning the pound slipped below $1.25 after the no-confidence vote was confirmed but reversed its losses after Theresa May made her speech outside 10 Downing Street. Prior to the vote the Prime Minister said she would fight for her role.

Stock markets rallied in Europe on hopes of a potential truce in the US-China trade dispute. Car manufacturers benefited from suggestions that China will cut tariffs on US car imports while a report from The Wall Street Journal suggested that Chinese officials were drafting economic plans in response to Donald Trump’s trade war threat. Driven by Chinese leader Xi Jinping, the new policy would replace the Made In China 2025 plan and give foreign companies greater access to China.

The FTSE 100 closed 73.25 points, or 1.08pc, higher at 6,880.19 while the FTSE 250 ended 335.71 points, or 1.84pc up at 17,978.84.
In the eurozone, the Paris CAC was ahead 2.15pc to 4,909.45 and the Frankfurt DAX was 1.38pc higher at 10,929.43.

By the time Mario Draghi declares an end to 2.6 trillion euros ($3 trillion) of stimulus on Thursday, his central bank and four others nearby will have delivered their own final decisions of 2018 in a volley of announcements almost every hour. Starting with the world’s lowest interest rate from the Swiss National Bank, and then later, the region’s two highest central bank benchmarks in Ukraine and Turkey, officials setting the cost of borrowing are likely to focus on the shape of policy in 2019 against a backdrop of shaky global growth. That’s likely to be a focus of questions to the European Central Bank president too.

The main event today will be the European Central Bank’s decision, following a ton of data from that region later today. Oh how the maths has changed since the last meeting on October 25. Not only has activity turned sour, but more critically, the U.S. Federal Reserve has become much less hawkish. Economists see a European hike in 2019 as a very tough sell, especially if the Fed ends its tightening cycle.

FTSE 100 Trading Signals, Forecast and Prediction

I think that we will get an early rise to start with today towards the resistance area at 6920 (and we also have a fib at 6916 for today). Before a drop back to the pivot. The market will probably breathe a bit of a sign of relief to start with that the political chaos isn’t as bad as it could have been with a leadership hunt having to take place. If the bulls were able to break above the 6933 level where we have a cam break out then the next resistance level of note is at 6957 and a level that might see a stutter.  For the moment the 2 hour chart remains positive and the support is 6813 and 6771 from that.

We are also nearing the top of the 10 day Raff again, with resistance at 6927 for today. the bulls failed to break 6900 yesterday, despite pushing through the 6884 resistance level so there is bullishness there, its just not that strong.  The ASX200 had a rise and dip session Thursday and I think that we will see a similar pattern. The S&P needs to break above 2666 which is 30min resistance, but looks good for a drop to the 2hr support area at 2631 – so if that dips this afternoon then we may follow them down.

We also have the ECB later – set to end the asset purchase program and announce no change to rates. Expect some movement at 12:45 though.

On the support side of things today, if the pivot where to break at 6863 then the 6825 S1 and fib at 6821 look likely to be tested, with 6740 below that looking like it would hold any tests – not sure we see that today but if we do a long here is worth a go.

So, cautiously bullish to start with this morning for a rise towards 6920.


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