Pound rallies as political wrangling continues | dip and rise again | 7361 7384 7440 resistance | 7320 support

FTSE 100 outlook prediction analysis for 12th November 2019

The pound enjoyed a rally against the dollar and the euro on Monday after Nigel Farage promised to stand down hundreds of candidates in Conservative-held seats, delivering a major boost to Boris Johnson’s election hopes. The Brexit Party leader said his party will not contest the 317 seats held by the Conservative Party and will focus on trying to beat Labour and other pro-Remain parties.

Sterling climbed from just over $1.28 to within touching distance of $1.29 and hit a six-month high against the euro at €1.1668.

The currency also received a boost after data showed that the UK economy had dodged a recession in the third quarter by growing 0.3pc – below the 0.4pc forecast, but better than the second quarter’s 0.2pc contraction. Although the economy grew just 1pc in the past year – its lowest annual rate in nearly a decade – it was still Britain’s 13th quarter of economic growth since the Brexit referendum, showing it has grown faster than Germany, France and the eurozone as a whole for most of the last two years.

The exporter-heavy FTSE 100 was knocked by the aggressive bounce from the pound, closing 30.84 points, or 0.42pc, lower at 7,328.54, as multinationals and major exporters dragged the blue-chip index lower. However, the closing price doesn’t reflect the decent bounce from the 7255 level, I did expect 7300 to hold better than it did though but it will be interesting to see how far this bounce carries now. We are nearing the 2 hour resistance at 7361 and 7386 first thing this morning.

Markets Up

Stocks in Asia looked set to claw back some of Monday’s losses as investors awaited further developments on a trade deal and kept an eye on the volatile situation in Hong Kong, while the dollar fell for the first time in six days. Futures pointed higher in Tokyo, Sydney and Hong Kong, where shares dropped as much as 3% Monday to lead a slide in regional markets on continued unrest in the city. In the U.S., the S&P 500 Index dropped for the first time in four sessions on below average volume. Treasuries were closed for the Veterans’ Day holiday, and the pound rallied as Prime Minister Boris Johnson’s efforts to leave the European Union got a boost from the Brexit Party. Elsewhere, emerging market shares fell the most in more than two months. Crude oil edged lower.

FTSE 100 Outlook | Trading Signals | Forecast | Prediction | Analysis

With yesterday’s bounce back the main levels in play are now 7316 for support initially, then 7260, while the 7361, 7386 and ultimately the 7440 level are also valid resistance. With that fairly large swing yesterday the range between supports and resistance is quite large. If the 2 hour chart holds as resistance, between the 7361 and 7386 area, then we may well see a leg down again, maybe to test that 7225 level mentioned yesterday. That however would then still present the option of a leg higher to close the year out around the 7700 level.

For today therefore I am looking at us starting to pull back a bit on the rise to this 7360 area, probably drop to test the 30min coral support at the 7316 level, where we also have the daily pivot at 7322. Should the bears break below this again then a test of yesterdays low at 7255 looks possible, and also that 7225 level. Will we get a bear Tuesday? There is of course the large 15.9 dividend tomorrow which will help underpin the bulls for the moment. That said, I fully expect a bit of a retrace still as the drop off 7430 still plays out.

7440 still looks relevant too, should we get that high, and coincidentally is also R2 for today. I have plotted a dual scenario at the pivot as if it breaks (pink arrow) then we should see a drop down to 7260 or lower, while if it holds then we could see a climb towards the 7440. The 30min chart certainly looks more bullish after the rise yesterday but the 2 hour resistance is also now in play after the drop over the past few days. Nothing like a slightly confusing picture! I am still favouring a drop down further from the 7430 level than the 7257 we bounced off yesterday though.

7365 is also the 61.8% retrace of 7430 to yesterdays low at 7257, and as such we may see this bounce start to stall at this area. With the 100 Hull MA on the 2 hour here, then it may be wise to fade in shorts at 7361 and 7383 for the next leg lower.  The fear/greed has dropped back to 89/100 and is still on extreme greed. The dividend will help things stay up though.

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