14th March 2019
The pound has swung wildly this week amid the political gridlock, jumping 1.2pc versus the dollar to above £1.32 yesterday as trading volumes on futures contracts leapt to their highest level in 2019. Sterling’s rally dampened the FTSE 100’s gains. The index lagged behind, inching just 8.04 points higher to close at 7,159.19. The FTSE 100 failed to break the current range during the session, which is 7080 to 7180, stalling once again at 7180 and dropping back. Overnight the bulls have again defended the 7140 level, and will of course be keen to push above the 7180, to target the 7210 and higher. With he S&P failing to break its key resistance at the 2820 level yesterday that is still the line in the sand for the US bulls – a break of that is a good sign for the bulls and a push towards 2900.
Last night vote result entirely ruled out a no-deal Brexit, which means that we may see May request an extension to Article 50, this delaying Brexit. Chaos looms large! After MPs voted to take no deal off the table on Wednesday night, Mrs May said she would hold another vote on her discredited deal on the eve of a crunch EU summit where leaders would decide on a British request to extend the deadline beyond 29 March 2019. If her deal is passed on March 20, the day before the summit, she would ask for a shorter extension until June 30. If it falls the request would be for a longer period.
Trump Shows Openness on Xi Summit
President Donald Trump acknowledged concerns in Beijing about the possibility of him walking away from a trade deal, offering to push back a summit with Chinese leader Xi Jinping until a final deal is reached. “We could do it either way,” Trump told reporters Wednesday at the White House. “We can have the deal completed and come and sign or we can get the deal almost completed and negotiate some of the final points. I would prefer that. But it doesn’t matter that much.” Trump’s comments represent a shift in tone from late last month, when he raised the prospect of a “signing summit” with Xi. Chinese officials have growing increasingly wary of putting Xi in a position where he might be embarrassed by an unpredictable Trump or forced into last-minute concessions.
U.S. Stocks Climb to Four-Month High
U.S. shares extended their rally to a third day Wednesday. The S&P 500 Index climbed, wiping out last week’s losses and reaching a four-month high as it held above the key 2,800 level. Oil prices surged to the highest this year as a decline in U.S. crude and fuel stockpiles added to evidence of a tightening market. Treasury yields edged up as orders for business equipment increased in January by the most in six months while the producer price index rose less than forecast in February. The pound jumped the most since April 2017 as the U.K. Parliament voted to reject a no-deal Brexit.
Brexit Mess Thickens
Britain’s Parliament voted to avoid an economically disastrous no-deal split from the European Union, opening the door to delaying Brexit and radically re-writing the terms of the divorce. The House of Commons voted 321 to 278 to reject leaving the EU with no deal and is now expected to seek to delay Brexit in the hope of securing a better deal, which markets would welcome. Speaking in the Commons, Prime Minster Theresa May said Parliament must now face up to the consequences of its decisions. She announced that if a deal can be agreed to in the coming days, she would ask the EU for a short “technical” extension to the March 29 exit day deadline. If there’s no deal, the delay will be much longer, she said.
FTSE 100 Trading Signals, Forecast and Prediction
Once again I am expecting a dip and rise day to play out today. We have had the Australian market do a similar pattern for their Thursday session, and we still have decent support at the 7100 area. Below this the bottom of the recent range is at 7080, and then the longer term support at 7067. If it were to drop to this latter support then I am expecting a bounce here, and have plotted the pink arrows on the chart below as the plan B. As mentioned above the bulls really need to break the 7180 area which has acted as resistance for a while now, as that opens up a retest of the 7211 level, with 7235 above that. Higher up then we have decent resistance at 7261 though I am not sure there will be enough bull power to get that high today, unless the pound really sells off. Worth watching that level though.
The daily chart is still bullish, and the 25ema is at 7125 – spikes below this line have been steadily bought back up over the past few daily candles – you can see the long tails on them on the daily Raff chart below. The 2 hour chart has support at 7141 which has supported the futures price overnight.
It will once again be worth watching cable today to see how it plays out in light of yesterday’s vote on a no-deal Brexit. The rise to 13382 yesterday after the vote kept the FTSE 100 down around the 7150 level. Further upside towards 135 and that will drive the FTSE down, however, the inverse is also true, and a drop down to the 130 support will enable the FTSE 100 to push through the 7180 resistance.
So once again, a day to stay nimble, expecting a dip and rise, and watching the support levels at 7100 and 7067, and resistance at 7180, 7211, 7230.
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