Technical analysis for FTSE 100 for 16th August 2024
Britain's equity indexes rose on Thursday as global markets cheered data that allayed concerns of a recession in the United States, while the UK economy grew in line with expectations.
The blue-chip FTSE 100 closed 0.8% higher and the midcap FTSE 250 added 0.7%, both rising for a fifth consecutive session.
Britain's economy grew 0.6% in the second quarter of 2024, building on a rapid 0.7% recovery in the first quarter of the year after a shallow recession in the second half of 2023.
The pound rose 0.3% against the U.S. dollar, but money markets trimmed bets on the Bank of England cutting rates by 25 basis points in September to a 33% chance from 40% on Wednesday.
Benign U.S. consumer inflation data overnight had reinforced bets for the Federal Reserve to start cutting interest rates next month, while weekly jobless claims dropped to a one month low last week and retail sales increased by the most in nearly 1-1/2 years in July.
Last week's market turmoil has quickly faded into a distant memory - at least for now - after a raft of U.S. economic data this week allayed fears of a deep downturn in the world's largest economy.
Recession alarm bells have stopped ringing, and investors seem convinced that the Federal Reserve is no longer behind the curve in cutting rates.
Market pricing now points to just a 25% chance of a 50-basis-point cut by the Fed next month, down from a 55% chance a week ago, according to the CME FedWatch tool, after July's U.S. inflation report pushed back against bets of an outsized move.
In Asia, Japan's Nikkei was a notable outperformer, with its 3% rise on Friday putting it on course for its best week since April 2020 as it tries to reclaim its record high. Asian stocks rallied as traders flocked back into risk assets amid growing expectations that the US economy will avoid a recession. The yen is set for its worst week since May.
Almost all major stock benchmarks gained in Asia, with a regional gauge on track for its best weekly performance in more than a year. Japanese shares were among the top performers as a weak yen boosted exporters’ earnings. The currency fell 1.3% against the dollar Thursday, and was trading around the 149 level, easing fears of a massive carry trade unwind. US equity futures edged higher.
Stock futures on Friday point to a firmer open in Europe and the U.S., with UK retail sales data due just as London wakes up.
Expectations are for shoppers to have returned to the high street in July, after a sharper-than-expected fall in June.
Bets remain for the Bank of England to ease rates at least once more this year, as inflation pressures subside and the outlook for Britain's economy for the remainder of 2024 turns less rosy.
FTSE 100 technical analysis for today, 16th August 2024
The bulls will be looking to end the week strongly, in what has been a decent recovery so far from last weeks lows. That said, a Friday after a good week can be a little odd so do exercise some caution today and be a bit more risk off. Initially we may well see a rise towards the first key resistance area at 8392 where we have R1 and the key fib.
Some profit taking here may well play out, though ultimately a rise towards 8430 could happen today, as long as the daily pivot support at the 8331 level holds.
If the bears were to break 8330 then 8280 is the next key support area and also probably worth a long, as we have the key fib and the 30m 200ema here.
Overall today I am thinking that we will get a rise and dip, as we see some profit taking ahead of the weekend.
The daily chart has also locked into bull mode now as well, with 25ema support at 8230. Am not expecting it to get that low today but a test of that rising moving average line may well happen next week.
Good luck today, be cautious, and have a great weekend.
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