Technical analysis for FTSE 100 for 18th January 2024
The FTSE 100 hit a seven-week low on Wednesday after a stronger-than-expected UK inflation reading and U.S. retail sales data tempered hopes of early interest rate cuts this year, while underwhelming data from China hurt commodity-linked stocks.
Extending losses for a third straight session, the blue-chip index fell 1.5%, its worst percentage drop since August 2023. The midcap FTSE 250 index dropped 1.7% to hit a one-month low.
Britain's annual rate of consumer price inflation (CPI) rose for the first time in 10 months in December to 4.0%, above economists' estimates, over a rise in tobacco duty.
The UK CPI data, while indicating core and headline inflation is receding at a faster pace than Bank of England (BoE) projections, remains stubbornly high and likely precludes an early rate cut.
Traders are now pricing in a more than 50% chance the central bank will hold rates in May. Concurrently, rate cut bets were further weakened by higher-than-anticipated rise in December U.S. retail sales, which also pushed Treasury yields higher.
ASIA
Most Asian equity benchmarks fell, led by China, after strong US retail sales data cast fresh doubt on the likelihood of a Federal Reserve rate cut in March. An intensifying rout has made China the world’s worst-performing major stock market in the new year as authorities struggle to reverse a deepening housing slump and stubborn deflationary pressures. The Shanghai Composite Indexslipped below 2,800 to the lowest since 2020 as authorities signaled they will avoid huge stimulus to revive growth.
Asian shares were off to a tepid start on Thursday, weighed down by a murky economic outlook in China and expectations the global rate easing cycle may not come as early as some had initially thought.
U.S. Treasury yields edged higher while the dollar hovered near a one-month peak as investors pared their bets on a rate cut by the Federal Reserve beginning as early as March.
FTSE 100 technical analysis for today, 18th January 2024
That was a decent hold of the 7400 level and the bulls have managed to build on that since, to the point were it looks a bit more optimistic for today.
For today we have initial resistance at the daily pivot at 7460 so we could see a rise to here then a drop off down to test the 30m coral support at the 7415 area. Slightly higher low then as well which would bode well for a rise back towards the 7500 area.
We also have the 2h Hull MA for resistance at the 7460 area and that would be the first test since it went bearish, so again, lends weight to a reaction here. The bulls will be keen to break above this though, probably on the second attempt, and helped by the US. The S&P500 chart is looking bullish to start with as well.
Above 7460 then the 7530 area has a cluster of resistance levels so should we see that then a short here is worth a go. The R1, 30m 200ema, and also the 2h coral are all in this area. Ultimately I am now looking for a rise towards the 25ema on the daily at the 7600 area, as that chart has locked in a bearish signal with resistance here.
Looking at the daily chart both the Raff channels are heading down as well now, as the start of year weakness plays out as per usual.
If the bears were to break below the 7400 level today then the next key supports are at the 7375 level with S1 and the 10d Raff channel bottom here. I don't think it will get that low today as it feels like the bulls will come out fighting today but if it dod then a long here is worth a go as well.
Good luck today.
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