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FTSE 100 Looks to Crucial Brexit Vote, S&P 500 Backs Off Resistance

FTSE 100 Looks to Crucial Brexit Vote, S&P 500 Backs Off Resistance

2019-01-11 16:00:00
Justin McQueen, Analyst
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Equity Analysis and News

  • Key Vote Likely to Go Against Theresa May
  • Dovish Fed Buoy Equity Markets

Key Vote Likely to Go Against Theresa May

Last month, Theresa May postponed the vote on her Brexit deal from mid-December to January 15th to get assurances on the Irish border backstop from the EU. However, failure to gain assurances, the chances of PM May’s passing her deal through parliament is somewhat slim. As a reminder, Theresa May survived a no-confidence vote, although, over 100MPs voted against her. Alongside this, a 1/3 of MPs from her own party have been vocal in their opposition to the deal. That said, as it stands, PM May could be set for a large defeat on Tuesday.

FTSE 100 Price Chart: Daily Time Frame (Apr 2018 – Jan 2019)

FTSE 100 Looks to Crucial Brexit Vote, S&P 500 Backs Off Resistance

The FTSE 100 eyes resistance at the 38.2% Fibonacci retracement (2016 low to 2018 high) at 6984, while the descending trendline at 7000 could also curb further advances in the index. As such, a closing break above the trendline would be needed in order to ease the bearish trend. However, failure for a topside breakout could see support a 6840 retested.

Dovish Fed Buoy Equity Markets

The Federal Reserve are continuing to show signs of flexibility when discussing further rate moves, suggesting that it could be prudent to wait patiently before the Fed acts. Consequently, this dovish shift has provided support for risk assets. Next week will see another raft of Fed speakers, however, given the recent rhetoric, markets now have the general view of the new direction from the Fed. Patience!

Recent Fed Commentary

Jerome Powell

Chair

The Fed has ability to be patient and flexible on rates (Jan 19)

Richard Clarida

Vice Chair

Fed can be patient in assessing how to adjust policy as data evolves this year (Jan 19)

Raphael Bostic

Non-Voter

Policy could move into either direction and he is open to a rate cut if downside risks all come to bear (Jan 19)

Eric Rosengren

Voter

Possible that the Fed will need to lower rates, but not in his view (Jan 19)

Notable Federal Reserve Commentary through Jan 7-11th.

S&P 500 Price Chart: Daily Time Frame (Aug 2018 – 2018)

FTSE 100 Looks to Crucial Brexit Vote, S&P 500 Backs Off Resistance

Recent gains look exhausted as the S&P 500 pushes hovers around resistance at 2600-30. Potential for a pullback which could see the index retest 2520, in which a closing break below, opens up room for a move towards 2400.

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--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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