Technical analysis for FTSE 100 for 5th February 2024
Britain's FTSE 100 slipped on Friday, as stronger-than-expected U.S. jobs data pushed up the dollar and yields, sparking a sell-off in commodity stocks. Most airline stocks rose, however, after Wizz Air (LON:WIZZ) reported a jump in January traffic.
The blue-chip FTSE 100 ended 0.1% lower, while the mid-cap FTSE 250 added 0.2%. Both indexes logged weekly declines.
Bets of early rate cuts are under check after U.S. jobs growth accelerated in January and wages increased by the most in nearly two years. This comes after the Federal Reserve already on Wednesday shot down market expectations of early interest rate cuts.
Investors also trimmed bets on the extent of interest rate cuts from the Bank of England after the central bank's Chief Economist Huw Pill said the right time for a rate cut is "still some way off".
Asian shares fell on Monday and the dollar climbed after a robust U.S. jobs report dashed any expectations of a near-term interest rate cut from the Federal Reserve, while stocks in China stocks remained on the back foot on weak sentiment.
Oil prices were tentative following fresh strikes in Tehran-aligned factions in Iraq, Syria and Yemen over the last two days by the United States, with rising tension in the Middle East keeping risk appetite in check.
FTSE 100 technical analysis for today, 5th February 2024
The bulls will be keen to retrace some or all of Fridays fall today though initially we have resistance at the daily pivot at 7640. With the 30m red coral here also, we may see any early rise falter here and then a drop down to the 7595 S1 level.
It feels like we may well get a dip and rise day though with a bit of bull Monday creeping in later on as the dip gets bought up. They will be keen to defend the 7600 level but I think an overshoot down to the S2 area any 7564 is quite likely. 7585 is also the key fib for today, while 7570 is also the first of the daily supports in play for this week.
Below 7570 though and the bears would be looking to take it down towards the 7540 level and that is just below the daily 200ema, though the daily chart has bullish momentum currently with positive EMAs still. The first test of that 25ema at 7605 on Thursday has seen a small bounce so far.
On the news front we have the ISM Services PMI in the US at 15:00 with a forecasted uptick to 52. Expect a bit of chop then. Meanwhile, Fed Chair Powell repeated his expectation that the March meeting is likely too soon to have confidence to start rate cuts.
On the resistance side, initially 7640 as mentioned then above that the bulls will be aiming for the 7685 level again which is the recent high from last week. Above that and then we are looking at the 7735 once again. Ultimately I am still thinking that we will see a break above the 7800 level before too long.
The markets have mostly shaken off the ramping up of Middle East tensions with attacks starting on Friday just after the market closed. Escalation is a very real possibility though so I expect we may well see some jitters creep in if it does.
The 2h S&P500 chart remains bullish and has decent support at the 4905 level. Any drop down to there should therefore see a decent bounce. That also ties in nicely with the S1 and 30m 200ema around the 4910 level. Continue to bear the seasonality in mind too - rise and dip in February!
Good luck today.
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