Technical analysis for FTSE 100 for 15th August 2024
London stocks ended higher after advancing for a fourth straight session on Wednesday as soft consumer prices data for July strengthened bets that the Bank of England will cut interest rates in its next policy meeting.
The blue-chip FTSE 100 and the midcap FTSE 250 index climbed 0.6% and 1%, respectively, and closed at a two-week high. Most sectors closed with gains, with rate-sensitive sectors like homebuilders gaining 3.4% and were amongst the biggest gainers.
Meanwhile, industrial metal miners slipped nearly 1% as base metals were under pressure after a bigger-than-expected drop in Chinese lending worsened sentiment.
British consumer price inflation increased for the first time this year in July, official figures showed, but the rise was smaller than expected as services prices - closely watched by the Bank of England - rose less rapidly.
Money markets have raised their bets of BoE cutting rates next month. They now see a 40% chance of a 25-basis-point rate cut, up from a 36% possibility on Tuesday.
In the U.S., consumer prices rose moderately last month and the annual increase in inflation slowed to below 3% for the first time since early 2021, boosting odds of a U.S. rate cut in September.
Asia Today
- APAC stocks shrugged off the mixed lead from the US and gained as participants digested a slew of key data; Nikkei 225 was among the biggest gainers after GDP data topped forecasts.
- Chinese activity data was mixed as industrial production disappointed but retail sales topped forecasts; China's stats bureau said China's economic operation was generally stable in July and added domestic demand is likely to improve due to policy support.
- Fed's Bostic (voter) is open to a September rate cut as inflation cools, and noted the labour market is weakening but is not weak, according to the FT.
- European equity futures indicate a firmer open with Euro Stoxx 50 futures up 0.4% after the cash market finished with gains of 0.7% on Wednesday.
This week, and this month, are once again showing that data is king, with investors parsing recent economic releases for clues on the likely pace of interest cuts at the Federal Reserve and the Bank of England.
Potential flashpoints for policy expectations loom for the currency markets on Thursday, when U.S. retail sales and Britain's GDP are due for release. The dollar and the pound could move sharply in either direction, depending on the results.
Mild readings for U.S. inflation this week have cemented market certainty that the Fed will lower borrowing costs in September for the first time in 4 1/2 years, but debate still rages over whether policy makers will opt for a super-sized 50 basis-point reduction or a more standard quarter-point cut.
Today, it's retail sales - a key indicator considering that consumption accounts for about two-thirds of U.S. economic growth.
Up later in the day are GDP estimates and a parade of other data, including industrial output. Traders are split on the chances of another rate reduction by the BoE a month from now, after it kicked off a rate-cutting campaign earlier this month in a close-call decision.
Key developments that could influence markets on Thursday:
- UK GDP, services, industrial output, manufacturing output
- Norges Bank policy decision
- US retail sales, industrial production, initial jobless claims, Philly Fed business index
FTSE 100 technical analysis for today, 15th August 2024
Decent bounce from the 8245 level yesterday,with a portion of the long still running into this morning. The bulls will be keen to build further on this, and will be aiming for the 8350 R2 level. News just out shows that the UK grew 0.6% in the second quarter as the economy's strong rebound in 2024 continued. The UK economy has now grown strongly for two quarters, following the weakness we saw in the second half of last year. Growth across the three months was led by the service sector, where scientific research, the IT industry and legal services all did well.
Initial support is at the daily pivot at 8276 to start with, and we also have the green 30m coral here. If this can hold then we should see a retest of yesterdays high at 8310 to start with, and we also have R1 here. A slight stutter here, though if we do bounce the bulls will be wanting to pull away from the 8300 level. The daily chart remains positive for some more upside, with the 10d Raff channel heading upwards once again and the positive EMAs - support at 8210 from them.
Below the pivot then the 8230 area is the next main support with the key fib and 30m 200ema here, followed by the 8210 mentioned. Lower down then 8205 is S2 though with US retail figures out later on, we may well see buy the rumour sell the news play out. The S&P500 bulls will be keen to push up towards the 5520 level and a test of the daily coral here, and the 2h chart remains bullish for that.
We have double topped overnight with the 8310 level hence thinking that an initial dip down may well be possible, but watch the daily pivot area for support.
I will keep trailing the stop on the 8245 long for the time being as well.
Good luck today.
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