UK100, H1 and Daily
UK July manufacturing PMI ebbed to a 3-month low of 54.0 in the survey’s headline reading, down from 54.3 in June (revised from 54.4).The report showed a deceleration in the pace of expansion in both output and new orders, while price pressures remained elevated.Overall, while on the disappointing side of expectations, the data is not expected to stop BoE from hiking the repo rate tomorrow by 25 bp, though the central bank will likely wrap the tightening in cautious guidance. The Pound recouped losses after dipping briefly in the initial wake of the release.
European Stock markets struggled after a mixed session in Asia. The UK100 underperformed and was down by -0.97% as of 10:24 GMT after the data and as yields moved higher ahead of tomorrow’s BoE meeting, while additionally materials and financial are leading the way. A lower Pound did not help to counterbalance pressure on companies like Rio Tinto as the manufacturing PMI came in weaker than anticipated.
FTSE has been trading to the upside since June 25, keeping resistance at 7745.1 level, which is the 61.8% Fibonacci retracement level since May’s dip from 7903 high. Today, the asset pulled back as it reverted from long-term resistance and it is currently retesting a key support level at 7635.03 as it is the confluence of 50-day EMA, the upwards trend line (gold line) and a breath below the 38.2% Fibonacci retracement level.
As the asset closed yesterday forming another higher high in the uptrend, today’s weakness might be suggesting temporary correction to the downside. However, from atechnical perspective, momentum indicators in the long-term remain on the neutral to positive bias for the asset, with RSI currently at 48 composing higher lows since end of June and MACD modestly rising above neutral zone.
Hence, as long as UK100 keeps rising by forming higher lows and highs, and as long as it closes today above 7630.00-7635.00 area, today’s weakness could be consider as “buying the dip opportunity” in the short- and medium-term time-frame. This could be also confirmed in the 1-hour chart as UK100 rebounded during the last hour to 7659.7 area from 7634.7, suggesting that bulls are trying to get the control of the asset.
In the short-term, momentum indicators were negatively configured, however they suggest that negative momentum is running out of steam, as RSI is at 35 after failing to cross below oversold barrier at 30, whilst MACD oscillator crossed below zero line but signal line holds within the positive area. Hence, Support remains in the short term as well, at the 7630.00-7635.00 area, while immediate Resistance is at S1: 7695.00 which coincides with the 50% Fibonacci retracement level. If the price action breaks this level, then the next barrier to be watch is yesterday’s highs, at 7780-7783.00 area.
Elsewhere losses were more muted, and the GER30 lost a mere -0.4 bp, while the French CAC 40 managed a 0.06% gain. Earnings and fresh concerns about US-China trade relations battled for attention amid reports that the Trump administration is considering lifting the tariff threat on Chinese imports. This followed source stories suggesting the US and China are mulling ways to restart talks and may be a ploy to increase the pressure on Chinese officials to back down in talks, but for today it put fresh pressure on Chinese markets – with the CSI 300 falling -2.00% and the Hang Seng closing with a loss of -0.85%.
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Andria Pichidi
Market Analyst
HotForex
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