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Market Outlook: UK beats budget

Best net borrowing since 2007
May 23, 2018

Rather than the £45 billion estimated by the office for Budget Responsibility, in the tax year to March 2018 Britain borrowed £40.5 billion, the lowest since March 2007.   Kicking off this tax year net borrowing in April was £1.6 billion, less than this time last year, and the lowest since April 2008.  OBR estimates that in this tax year public sector borrowing will drop to £37.1 billion, a quarter of 2010’s peak.

The Wall Street Journal reports that US Congress yesterday approved a revamp of rules governing financial institutions, pushing back on Dodd-Frank reforms.  The House voted 258 to 159 to allow small and mid-size banks more leeway so as to expand and lend more.  The bill has already been approved by the Senate (67031 vote) and just needs President Trump’s signature.

DAX 30

Overbought and precariously poised with a little dragonfly candle yesterday as we hover at the Fibonacci 76.4 per cent retracement of this year’s decline.

 

SHORT TERM TRADER:  New tiny short at 13145; stop quite a bit above 13200.  Target 12400.

 

POSITION TAKER:  Square.

FTSE 100

Talk about overbought, and ahead of an imminent shake-out of FTSE 100 constituents.  A dragonfly/shooting star doji yesterday does not bode well. 

 

SHORT TERM TRADER:   New tiny short at 7855; stop well above 7900.  Target 7400.

 

POSITION TAKER:  Square.

S&P 500

The commodity channel index is now clearly bearish and we have a potential tiny double top at 2740.

 

SHORT TERM TRADER:  Short at 2725; stop above 2755.  Target 2625.

 

POSITION TAKER:   New small short at 2720; stop above 2755.  Target 2620.

BRITISH POUND/US DOLLAR

Very oversold but the 1.3400 level did not manage to stem the slide of the last month.

 

SHORT TERM TRADER:  Stopped out this morning on the break below 1.3400.

 

POSITION TAKER:  Also stopped out of this long position this morning.

EURO/US DOLLAR

Another oversold currency which continues to try and stem this month’s losses.  Data this morning from France shows Q1 unemployment rose from 9 to 9.2 per cent, well higher than the 8.8 per cent expected, and certainly not what Macron’s En Marche promised.

 

SHORT TERM TRADER:  Long at 1.1795; stop well below 1.1700.  Target 1.2150.

 

POSITION TAKER:  Square.

GOLD

Momentum’s still bearish as we consolidate under the pivotal 1310 area. 

                            

SHORT TERM TRADER:  Short at 1292; stop quite a bit above 1300.  First target 1240.

 

POSITION TAKER:  Square.