FTSE Declines Ahead of Non-Farm Payrolls – Trader Sentiment Turns Negative
The FTSE dropped 0.40% today ahead of important jobs data from the US. Forecasts predict an increase of 185k jobs, indicating a strong econo
The FTSE dropped 0.40% today ahead of important jobs data from the US. Forecasts predict an increase of 185k jobs, indicating a strong economy.
After a rally yesterday when the ECB cut interest rates by 0.25% as expected, the market is showing concern for strong economic data from the US. A strong economy may delay the Fed from taking its first step in easing monetary policy.
The ECB’s cut in rates yesterday was met with little positive reaction from the main Eurozone stock markets. The DAX is down 0.30% and the CAC is down 0.42% on the day. The London Stock Exchange has turned its focus on the possibility of interest rates staying high for longer.
The small momentum gained after the last BoE monetary policy meeting, where a second board member voted for a cut has faded out of traders’ attention. As we have often seen recently good economic news may be met negatively by the stock market.
Strong economic growth may mean the Fed pushing their first rate cut further into the year. And what the market wants more than anything is for rates to start coming down.
Technical View
The day chart below for the FTSE shows a bullish trend undergoing a correction. The high on May 15, of 8,480 led to a retracement back down to the 0.382 Fibonacci retracement at 8,143 (yellow line).
The subsequent bounce higher didn’t take the market past a previous high and we’re still in a down leg. This leg reached a high of 8,234 creating a new Fibonacci retracement area. The leg down closed on the 0.50 retracement line and tried to reach the 0.236 line.
The market failed to break that level, so that is a further indication of the current weakness of the market. Today’s candle has again found support on the 0.50 Fibonacci line. Should that level break, the next minor support is the 0.618 Fibo line of the last upward leg at 8,226.
If that area breaks, the next major support is at the 0.382 Fibo line of the major rally at 8,143. This level also coincides with the Ichimoku cloud, which would strengthen this level for major support.
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