Technical analysis for FTSE 100 for 10th May 2024
The FTSE 100 hit a record high for a fourth straight session on Thursday after the Bank of England held interest rates but indicated that more policymakers are warming up to a cut in borrowing costs soon.
The blue-chip index ended the session 0.3% higher, after rising as far as 8,396.25 points earlier in the day, while the mid-cap FTSE 250 added 0.2% to a 15-month high.
The FTSE 100 has risen more than 8% so far this year, more than double its 3.8% gain in 2023, benefitting from a slowdown in inflation and renewed hopes of interest rate cuts, along with strong performances from multinational conglomerates.
The Bank of England (BoE) kept interest rates unchanged at 5.25% at its May meeting. Market participants anticipated this decision, which reaffirms the commitment to returning inflation to the 2% target.
The decision was made with a 7-2 split in the vote. Monetary Policy Committee (MPC) members Swati Dhingra and Dave Ramsden dissented, advocating for a rate cut.
However, the most significant news stems from the updated BoE’s economic projections and Governor Andrew Bailey‘s comments.
The BoE now anticipates that headline inflation will decline to 1.9% in two years and to 1.6% in three years. This forecast indicates that price pressures are expected to fall below the target over the monetary policy horizon.
As such, Bailey adopted a dovish tone during the press conference. The bank will likely need to cut rates “over the coming quarters” and “more than is currently priced into market rates,” he said.
The bank will now be guided by upcoming data when making rate decisions. Bailey did not rule out the possibility of a June rate cut. There will be two inflation readings before that meeting. Bailey mentioned that a “small cut” would still maintain a restrictive monetary policy stance.
Asia
Asian stocks rose on Friday, on course for a third week of gains, while the dollar was steady as fresh signs of an easing U.S. labour market stoked optimism around interest rate cuts this year ahead of next week's crucial inflation data.
Sterling was steady at $1.2515, having touched a more than two-week low of $1.2446 on Thursday after Bank of England (BoE) paved the way for the start of rate cuts as soon as next month.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.66% and was on course for a nearly 1% gain for the week, its third straight week of gains. Japan's Nikkei was 0.37% higher.
China stocks were lower, with blue-chip shares down 0.28% as geopolitical concerns weighed on sentiment following a trade restriction list issued by the Biden administration and potential new China tariff. Hong Kong's Hang Seng Index though rose 2%, having touched an eight-month high in early trading.
The risk-on mood is set to continue in Europe, with Eurostoxx 50 futures up 0.14%, German DAX futures 0.19% higher and FTSE futures up 0.45%.
Data on Thursday showed U.S. initial claims for state unemployment benefits increased more than expected by 22,000 to a seasonally adjusted 231,000 for the week ended May 4, the Labor Department said.
The figures follow last week's report showing U.S. job growth slowed more than expected in April and the increase in annual wages fell below 4.0% for the first time in nearly three years.
FTSE 100 technical analysis for today, 10th May 2024
The FTSE100 continues its march upwards and has now managed the 8400 level out of hours. The bulls will still be keen to keep the momentum going ahead of the weekend and we may well see a push up towards the 8450 area today, to get a nice 100 pointer from the 8350 support level yesterday. Still running the long from there for the moment but keep trailing the stop.
Initial support is at the daily pivot at the 8396 level and coincides nicely with the round number. If the bears break below this though then a drop down to 8370 S1 would likely play out, and the bears will gain the upper hand for a retest of the 8350 as well.
That said the 2h coral is at 8360 and it would be the first test of that since it went green, and while we are in bullish mode, and buy the dip mentality, we should see this hold if tested. 8344 is also the key fib and just above the 200ema on the 30m chart, so again a couple of other supports lending weight to this area.
All that said, lets see if the 8400 holds and the bulls can make more "all time high" headline ahead of the weekend.
Resistance wise then initially the 8450 as mentioned, and above this the 8472 may well cap proceedings and lead to some profit taking later. We have R2 here, and a push to 8500 ahead of the weekend is probably unlikely.
UK GDP has just been released and slightly beat expectations at 0.6% in another bit of positive news. Was probably known yesterday hence the buying (cynical). It means the UK economy emerged from a recession in the first quarter of 2024, posting the fastest growth since 2021, which is handy!
So looking for a rise and dip again today really, with that 8450 area being the key resistance.
Good luck and have a great weekend.
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