FTSE Opens the Week Flat on Middle East Tensions – Fed Talk

Stock markets stumble on Monday’s open as tensions rise in the Middle East and investors weigh hawkish Fed comments.

Last week closed with most markets recovering lost ground. The FTSE managed to close Friday up 0.24% on the week. Investors are watching the developments in the Middle East as the U.S. sends the Abraham Lincoln aircraft carrier to join the Theodore Roosevelt.

The market has been expecting a strike by Iran on Israel which may spark U.S. military intervention. War in the region could escalate to other regions and stock investors fear a possible panic in risky assets.

On Friday, Kansas City Fed president Jefrey Smith made hawkish statements that the FOMC might not be ready to cut rates in September. Stock investors are weary of this type of talk, as jobs data is soft, and inflation is declining.

There is no economic news today, for tomorrow we can expect UK employment data with most forecasts expecting a drop in employment of 35k jobs. Analysts are also expecting unemployment to rise to 4.5% from 4.4% last month.

Softer employment data should strengthen the case for the BoE to continue cutting rates when MPC meeting resume after the summer break.

Technical View

The day chart below for the FTSE shows a market that is in a bear trend with the market below the Ichimoku cloud. However, the recent market action has shown a major correction which has brought today’s candle to the resistance of the cloud.

The market is struggling today with resistance from the cloud, should that break the next resistance is at 8, 278 (blue line), just above the cloud. To consider the market as regaining a bull trend we would need to see a close above the cloud and the blue line.

To the downside, the support would be at 8,036 (black line), which corresponds to the dip on the selloff last Monday. If that level of support breaks, the next support is at 7,753 (green line), which corresponds to the dip before the rally to the all-time high.

ABOUT THE AUTHOR See More

Gino Bruno D'Alessio

Gino D’Alessio is a professional Forex trader with 20+ years of experience in the financial markets as a broker-dealer. Having worked in New York and London, Gino is regularly featured on Seeking Alpha. He completed the CAIA program in 2015, which also gave great insight into global macro factors. His main focus is FX majors, indices and commodities.

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