Date: 14 Nov 2018

Yesterday comments from a British official indicated that United Kingdom (UK) and the European Union (EU) were close to sealing an agreement for the nation to leave the Eurozone as negotiators seek to avoid missing the deadline today. Uncertainty over the terms of Brexit has annihilated FTSE 100 early gains as a deal is required to keep the business open between the EU and the world’s fifth-biggest economy. Prime Minister Theresa May will present a draft text of a Brexit withdrawal agreement to her senior ministers on Wednesday the 14th after both the UK and EU reached consensus on the Brexit divorce deal.

UK’s preliminary gross domestic product (GDP) expanded 1.5% year-on-year in the third quarter of 2018, comparing to 1.2% registered in the previous period and confirming analysts’ forecast. It was the strongest increase since the third quarter of 2017 boosted by household consumption and exports, however, business investment fell the most since the first quarter of 2016. The GDP is considered as a broad measure of the UK economic activity. General speaking, a rise leads to a stronger UK economy.

The ILO unemployment rate in the UK rose to 4.1% in the third quarter of 2018, comparing to the 4.0% registered in the previous quarter and slightly above analysts’ estimates of 4.0%. The number of unemployed rose by 21K from the April to June period while employment rose by 23K and the number of job vacancies hit a fresh record high. If the rate is up, it indicates a lack of expansion within the UK labour market. As a result, a rise leads to weakening the UK economy.

Since the beginning of 2018 until last Monday close, the UK index is underwater with over 8.0% loss and since the start of November FTSE 100 lost its grip resulting in more than a 0.5% drop. Nonetheless, the week remains under a downward pressure with over 1.6% dive and on the daily basis closed slightly in the red with a 0.28% loss. Furthermore, the index remains in a bearish phase since early October.

On yesterday session, the FTSE 100 tried to rise but found enough resistance near the 10-day moving average at 7,075.5 to reverse and closed near the low of the day, in addition, managed to close shy below Mondays’ low, which suggests a strong bearish momentum.

The stochastic is showing a strong bearish momentum although is still above the 50 midline.

The darkest month for the FTSE 100 was October that fell from 7,474.0 down to 6,823.0 before making a small upward correction to 7,083.0. Since the beginning of November, the UK index has been in a sideways correction ranging from 7,171.6 (resistance) down to 6,986.4 (support). Both resistance and support are convergent with the 50 and 23.6 Fibonacci retracements. Therefore, a breakout from this consolidation will set the new trend for the next couple of days. A breakout from the 50 Fibonacci retracement at 7,171.6 (resistance) may propel the price to a target at 7,356.9, on the other hand, a breakdown of the 23.6 Fibonacci retracement at 6,986.4 (support) may force the price down to a target at 6,800.2 which is very close to the year-to-date low at 6,765.5.

UK100 is a CFD written over FTSE100 futures.

 

FTSE 100: Dragged down by contradictory headlines and reports

UK100 Dec ’18 Daily Candlestick Chart

 

Watch out this Week:

On Wednesday, November 14 at 09:30 GMT (04:00 AM ET) the National Statistics is scheduled to release UKs’ core consumer price index (CPI) year-on-year in October, which is expected by market analysts to rise 2.0% compared to 1.9%, registered in the previous month. The “core” excludes seasonally volatile products such as food and energy in order to capture an accurate calculation. The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally, a high reading is seen as positive for the UK economy, while a low reading is seen as negative.

On the same day at 09:30 GMT (04:00 AM ET) the National Statistics is scheduled to release the UK’s’ consumer price index (CPI) year-on-year in October, which is expected by market analysts to rise to 2.5% compared to the 2.4%, registered in the previous month.

On Thursday, November 15 at 09:30 GMT (04:00 AM ET) the National Statistics is scheduled to release the retail sales year-on-year in October, which is expected by market analysts to come in unchanged at 3.0%, comparing to the previous period. However, at the same time, the release of the retail sales month-on-month in October is estimated to rise 0.2% comparing to the -0.8% registered in the previous month.

 

Written by Hugo O’Neill, External Analyst

 

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