Technical analysis for FTSE 100 for 21st March 2024
London's FTSE 100 closed flat on Wednesday with caution looming ahead of the U.S. Federal Reserve's policy decision, while softer domestic inflation data cemented bets of interest rate cuts this year from the Bank of England. The globally-focussed FTSE 100 held its ground at 7,737.38 points with traders gearing up for the Fed's monetary policy decision at 1800 GMT and remarks on the timing of interest rate cuts.
Closer to home, Britain's inflation cooled to 3.4% in February ahead of the Bank of England's monetary policy verdict on Thursday and offering some respite to Prime Minister Rishi Sunak before an election expected later this year.
Traders now see about 70 basis points of rate cuts by the BoE this year, up from around 67 bps prior to the data release.
Asia
Asian shares rallied to their highest in nearly two years after the Federal Reserve signalled it remains on track for three interest-rate cuts this year despite an uptick in inflation. Asian shares bounced while gold prices and Japan's Nikkei jumped to record highs on Thursday after the U.S. Federal Reserve indicated it would stick with plans for cutting interest rates.
A gauge of regional stocks rose to a level last seen in April 2022, powered by gains in tech firms listed in Hong Kong and South Korea following Micron Technology Inc.’s strong revenue forecast reflecting artificial intelligence-induced demand.
Asian stocks advance with Nikkei 225 at a new all-time high north of 40,500 following the fresh record levels on Wall St post-dovish FOMC where the Fed maintained the projection for 3 rate cuts in 2024 and Powell downplayed recent hot inflation data: ASX 200 (+0.7%), Nikkei 225 (+1.3%), KOSPI (+1.4%)
Fed Chair Jerome Powell told reporters sticky inflation reports show price pressures but "haven't really changed the overall story, which is that of inflation moving down gradually".
The U.S. dollar nudged lower and traders slightly increased their expectations for a U.S. rate cut in June.
FTSE 100 technical analysis for today, 21st March 2024
Hot on the heels of the Fed holding rates as is, we have the BoE today, widely expected to do the same. What boosted the markets though was the talk of 3 rate cuts this year. If UK inflation keeps dropping then the BoE may well follow suit, though based on previous talk they are not really in a rush to do so. The rate news is released at midday with 5.25% expected.
Overnight we have seen the 7800 level and that brings the daily resistance level at 7846 (also the top of the 20d Raff channel) into play for the first key resistance. Above that then I am also looking at the 7865 level which is R3 and the top of the 10d Raff channel. As mentioned in yesterday's email, the Raff channels are pretty positive, both heading up. And in the key trends table above you can see that we are green across the board. Unfortunately I also feel that a bit of caution is maybe due soon, due to a couple of other factors that I look at. The market can get quite irrational at times but better to wait for a confirmed short signal before trying to short a rally, in terms of swing trades anyway.
7808 is also the key fib that has held as resistance overnight and in fact that may well drive an initial drop down towards the 7555 support level. We have the daily pivot here, and also the 7762 level is the green 30m coral, with 7742 200ema just below that. As such, should we test this area then I would like to see a bounce here.
Slightly lower down is 7736 which is flagging as 2h support, with both the Hull MA and the coral (now green) here. The bulls would really need to defend that if it were to get that low.
The US may well continue a bit higher yet and that should help to underpin the bullishness on the FTSE100 as well. I still expect we will see 8200 this year.
So, watch for the news at midday. A dip and rise looks like it might well play out and let's see if they defend 7550 if that is seen.
Good luck
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