Bulls on the front foot with 8290 8255 8210 support | 8381 8441 resistance

Bulls on the front foot with 8290 8255 8210 support | 8381 8441 resistance

Technical analysis for FTSE 100 for 3rd June 2024

London stocks closed higher on Friday, logging a third straight month of gains, as investors cheered an in-line inflation reading from the U.S. that brought back some hopes of a September rate cut by the Federal Reserve.

The blue-chip FTSE 100 index rose 0.5%, while the mid-cap FTSE 250 was up 0.3%. Both indexes logged a third straight month of gains, despite ending the week lower.

The much awaited U.S. personal consumption expenditure (PCE) data showed inflation rose in line with expectations in April, reviving some bets of a September interest rate cut from the Fed.

Meanwhile, euro zone inflation rose in May, data showed, in a sign that the European Central Bank still faces a slow and uncertain journey to rein in prices.
Analysts predict that the Bank of England will closely align with the European Central Bank's actions to initiate the rate-cutting cycle, with the ECB almost assured to cut rates next week.

Asia & Overnight
Asian share markets rallied on Monday as investors looked forward to a rate cut in Europe, and quite possibly Canada, as the next step in global policy easing, though sticky inflation threatens to make the process a drawn out affair.

There was also better news from China as the private Caixin survey showed a pick-up in its main factory index to a two-year top of 51.7 in May, from 51.4 in April.

Japan's factory activity expanded for the first time in a year in May, while activity in South Korea grew at the fastest pace in two years.

All of which helped MSCI's broadest index of Asia-Pacific shares outside Japan bounce 1.4%, having slid 2.5% last week. Chinese blue chips added 0.3%. Japan's Nikkei rose 1.1%, after rebounding from one-month lows on Friday, while South Korea gained 1.8%.

EUROSTOXX 50 futures climbed 0.9% and FTSE futures 0.7% as the risk-on mood spread.

Month-end flows saw Wall Street stage a late rally on Friday and left the Nasdaq up almost 7% for May. Early on Monday, S&P 500 futures were up 0.2%, with Nasdaq futures adding 0.1%.

The prospect of lower borrowing costs globally has been generally positive for equities.

The European Central Bank (ECB) is considered almost certain to trim rates by a quarter point to 3.75% on Thursday, the first time in history it would have eased ahead of the U.S. Federal Reserve. However, a surprisingly high reading for euro zone inflation out last week blunted hopes for a rapid round of reductions and markets have 57 basis points of easing priced in for this year.

Oil prices recovered from an early dip to push higher on Monday after OPEC+ agreed on Sunday to extend most of its oil output cuts into 2025, though some cuts will start to be unwound from October 2024 onwards. Brent rose 38 cents to $81.49 a barrel, while U.S. crude firmed 39 cents to $77.38 per barrel.

FTSE 100 technical analysis for today, 3rd June 2024

Starting the week strongly once again as some new month exuberance kicks in and the bounce from 8150 continues into June. We may well see any early rise falter at the 8380 area though as we have R2 here, and it's just above the 8370 daily resistance level. If that does play out then we could see a dip down and some profit taking towards the 8300 level.

If that area holds, and I think it probably will, to set up a decent bullish Monday and a decent start to June, then a bounce here would make sense. The ECB are rumoured to do a small rate cut this week which may well help to underpin the strength as well. 8300 is also the now green 30m coral line, and then 8283 daily pivot below that. As such I think a long in this area today would make sense.

We are just looking to open bang on the R1 level at 8343 so the bulls will be keen to pull away from here to start with, otherwise we will just drop off from here to start with.

On the news front we have ISM manufacturing at 15:00 for May - forecasted for a slight uptick, so again if that comes to pass it should help the bulls this afternoon.

Above the 8380 level then ultimately R3 at 8441 would be the bulls target and then we are back looking at the possibility of 8600+ on the bullish charge ahead of the summer. 8441 might be a big ask today though, but we are just breaking out above the 10d Raff channel already today, and the top of the 20d channel is at the 8455 level so its not totally impossible. The momentum has swung back into the bulls favour for now.

For the bears today, should the 8280 are break then we are looking at the 2h supports at the 8225 Hull level, and 8210 for a test of the green coral. It would be pretty bearish to get this low today though so I am not expecting it to get this low and would prefer to see the 8280 area hold!

S&P500 and DAX40 are both also looking more bullish now with positive 2h charts and 5234 and 18460 as the supports to keep an eye on.

Good luck today.

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