FTSE 100 futures opened Friday's session

FTSE 100 futures

• The dollar started Monday weak in Asian trading but regained its glamour and traded higher against all of its G10 peers during the European morning as investors start to see improving US economic fundamentals and the Fed preparing for rate hikes. On top of which, pressure on Europe at the G20 finance ministers and central bank chiefs’ summit increased the perception of a divergence between the economic prospects for the US and the Eurozone. The dollar’s biggest advance was against the AUD amid speculation that the slowdown in China will lower demand for commodities and will hurt the Australian economy.

• Asian and European shares fell during European midday as China’s finance minister admitted that there won’t be major changes in policy despite downward pressure on the Chinese economy. However, his remarks contradict somewhat last week’s liquidity stimulus by the People’s Bank of China to support loan growth and boost the country’s economy. Manufacturing data expected on Tuesday could provide more evidence of a slowdown in China and put further selling pressure on the equity markets.

• After the results of the Scottish independence referendum were announced, FTSE 100 futures opened Friday’s session with a bullish gap, breaking above the upper line of the near-term downside channel. However, the price found resistance at 6860 (R2) and, after China’s finance minister diminished expectations for further stimulus measures, it opened today’s session with a gap down to return back within the aforementioned channel. Taking that into account, I would see a cautiously negative near-term picture, but I would prefer to wait for a dip below the support line of 6720 (S2) before getting more confident about further declines. Such a move is likely to set the stage for extensions towards the next support line of 6650 (S3), determined by the lows of the 15th of August. Our momentum studies also confirm the recent bearish momentum. The RSI crossed below its 50 line and is pointing down, while the MACD appears to have topped marginally above its zero line and could dip below its trigger in the close future. In the bigger picture, on the daily chart, a longer-term upside channel contains the price structure, thus I would consider any further declines within the channel as a corrective phase of the longer-term uptrend.

• Support: 6740 (S1), 6720 (S2), 6650 (S3).

• Resistance: 6800 (R1), 6860 (R2), 6900 (R3).