Technical analysis for FTSE 100 for 12th February 2024
UK stocks fell on Friday after a drop in Legal and General Group dragged the life insurance sector lower, while bond yields rose after comments from Bank of England's Jonathan Haskel pushed investors to trim their bets on interest rate cuts. The blue-chip FTSE 100 was down 0.3% on the day and hovered around two-week lows, while the midcap FTSE 250 slipped 0.2%. Both the indexes logged losses for a second week.
BoE policymaker Haskel, who voted to raise interest rates last week, told Reuters he is encouraged by signs that Britain's inflation pressures might be on the wane but he would need more evidence of a cool-down before changing his stance.
European equity futures edged higher after the S&P 500 closed at a new record high Friday amid optimism over eventual Federal Reserve interest-rate cuts. Trading in Asia was muted with a swath of markets shut for Lunar New Year.
Contracts for the Euro Stoxx 50 show the benchmark is poised to extend its advance after finishing Friday with a third weekly gain. The S&P 500 closed above 5,000 for the first time amid a renewed rally in big tech companies.
It's been unsurprisingly quiet in Asia on Monday with China, Japan, Singapore and several other centres on holiday. It's also a public holiday for Lunar New Year in New York State for the first time, although that doesn't seem to encompass Wall Street. U.S. stock futures are barely changed, European equity and Treasury futures a fraction firmer and the dollar a shade softer.
Markets would likely have been cautious anyway given the U.S. consumer price report for January is out on Tuesday and will refine wagers on whether the Federal Reserve cuts in March or May.
Headline CPI is forecast to rise 0.2% month-on-month, with core up 0.3%. The annual CPI would return to 3.0%, where it was in the middle of last year, while core is seen slowing to 3.8%, the lowest since mid-2021. Prices for used cars are set to be a big drag, while everyone is waiting for rent growth to finally start slowing.
The range of estimates for the core is +0.1% to +0.3%, which suggests the risks lean to the downside. Note the seasonal adjustment revisions out last Friday will make little difference, given the six-month annualised pace changed just marginally to 3.25% from 3.21%.
Futures have given up on a March rate cut, which has come in to just a 17% chance, while a May easing stands around 80%. The market implies 121 basis points of cuts for the year, down from 145 basis points a couple of weeks ago.
There are at least eight Fed speakers on the calendar this week, including the always influential Governor Christopher Waller.
Also out this week is U.S. retail sales data, which is forecast to fall 0.1% overall but to rise 0.3% excluding autos. The control group which maps to GDP is seen even firmer at +0.4%, continuing the run of solid consumption indicators.
Britain also has CPI data and a reading on Q4 GDP, which could show a small contraction and thus confirm a technical recession. That would be uncomfortable timing for the government, given there are two by-elections on Thursday and polls suggest the Conservatives could lose both.
The head of the Bank of England speaks later on Monday and analysts assume he will reiterate the bank's hawkish line on no early rate cuts.
FTSE 100 technical analysis for today, 12th February 2024
Asian markets being closed means we will probably be taking our lead from the US today and a bit more movement this afternoon. Initially we are opening right on the daily pivot at the 7587 level so we may well see the bulls try and drive it up from here, towards the 7620 resistance area where we have R1 and the 30m 200ema.
That was also resistance on Friday though it wasn't tested so we may well see a reaction here. If we get that then a drop down towards the 7561 S1 level may well play out. Was a very slow reaction there on Friday but in the end it did hold and we had a fairly positive close after all. 7560 is also the daily 200ema to again lend weight to this level.
Below 7561 then the bears would be looking to test the 7544 key fib level, then more likely the bottom of the two Raff channels at the 7530 level where we also have S2.
For the bulls, a break above 7620 would likely see a rise towards 7665, but with a bearish 2h chart, and resistance from the Hull MA at 7610, and then a red coral at 7630, we may well see the bulls struggle to push on. Initially at least.
The S&P500 has broken and held the 5000 level and is steadily rising still, with 5045 on the radar for today, and possibly higher. The 2h chart is bullish as well, with support from the Hull MA at 5015.
In a similar vein the Dax40 is also bullish to start the week with a rise towards the 17060 level looking possible, whereupon we may well see the bears appear.
So thinking a bit of a bull Monday mostly with a rise and dip to play out today.
Good luck today.
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