10th April 2019
The return of US-EU trade tensions and another gloomy growth warning from the International Monetary Fund dragged the FTSE 100 off a six-month high. The IMF cut its forecast for global growth to the lowest since the financial crisis amid a bleaker outlook in most major advanced economies and signs that higher tariffs are weighing on trade. The world economy will grow 3.3 percent this year, down from the 3.5 percent the IMF had forecast for 2019 in January, the fund said Tuesday in its latest World Economic Outlook. The 2019 growth rate would be the weakest since 2009, when the world economy shrank. It’s the third time the IMF has downgraded its outlook in six months.
Donald Trump has threatened to widen his trade war by slapping tariffs on $11bn of EU goods in retaliation for subsidies supporting European aerospace giant Airbus. The US Trade Representative released a wide-ranging list of goods, including aircraft, cheese and wine, that could be targeted by the White House, warning that “the time has come for action”.
The US has complained in a long-running row that the EU unfairly helps Airbus at the expense of American rival Boeing and warned that the tariffs will be imposed this summer. The 14-page tariffs hit list targeting EU products also included butter, fish, jam, olive oil and suits. Mr Trump later warned on Twitter that he will “soon stop” the EU taking advantage of the US on trade, arguing that the subsidies for Airbus had “adversely impacted” his country.
The measures will mark the first major escalation in trade tensions between the US and EU since a tit-for-tat tariffs exchange last year. The Trump administration put taxes on European steel and aluminium imports while the EU responded by hitting iconic American goods, targeting Harley-Davidson motorcycles, bourbon and Levi’s jeans.
The latest escalation in trade tensions could be a precursor to US tariffs targeting Europe’s embattled car industry. The Trump administration is mulling tariffs on EU cars after commerce secretary Wilbur Ross submitted a report in February on whether they pose a threat to national security, giving the US president 90 days to decide whether to press ahead.
EU Set to Force U.K. Into Long Brexit Delay
Britain’s exit from the European Union looks set to be delayed by as long as a year in a blow for Theresa May that risks a destabilizing backlash at home. European Council President Donald Tusk rejected May’s request for a brief postponement to the U.K.’s membership, saying it would create a “rolling series of short extensions and emergency summits, creating new cliff-edge dates.” Leaders will finalize the length of the delay to Brexit at a summit on Wednesday. Tusk wants them to agree to an extension of up to a year, and diplomats from member states see December 2019 or next March as the likely new departure date. Draft conclusions show EU leaders are planning to offer Britain an early exit clause in case a solution to the domestic deadlock turns up.
FTSE 100 Trading Signals, Forecast and Prediction
We failed to drop as low as 7400 yesterday with the 200ema on the 30min at 7412 providing the support instead. That said the FTSE 100 has pretty much trod water since then, however it does still look primed for a rise towards the 7485 level. As we are still hovering around the 200ema we may see an initial rise this morning, following the ASX200 pattern which was a steady rise for most of the session. We also have a 7.8 dividend today so that may well help keep things above 7400 for the moment. The FTSE 100 has actually been pretty resilient so far this week as the news flow has been quite negative. It’s often said that the indices run 6 months ahead of the current time, so news etc is usually priced in. Might well be the case here.
Anyway, if the bulls do take control first thing then we should see a rise back towards the 7460 resistance area. and in fact we have the 2 hour coral at the 7455 level. While still technically green if the bulls do not break above this then that will probably turn red today and act as resistance. That said, the 7482 area has fib and daily resistance and as such is worth a short. Above this then the 7526 resistance level is likely to be tested and may well hold, certainly initially.
For the bears, they will need to break the 7400 level as that opens up a test of the support at 7384 and probably the 7367 level. Below this then S3 at 7328/7313 looks possible and the bulls will need to make a bounce at this area stick.
So for today it looks like we might have a bullish bias, and a rise towards the 7482 level looks likely.
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