FTSE 100 technical analysis for 3rd August 2023
Will the FTSE 100 climb today?
European markets suffered a major blow on Wednesday as traders reacted to the downgrade to the United States’ debt rating.
In London, the FTSE 100 dropped by as much as 1.9pc during the day but had clawed back some of its losses by the time the closing bell sounded in the afternoon. The blue-chip closed the day 1.4pc lower at 7,561.63. The FTSE 250 midcap index shed 1.38pc to close at 18,812.88. Meanwhile, France’s stocks closed down 1.3pc and those in Germany fell 1.4pc.
Shares in Asia fell for a third day, following losses on Wall Street, while Treasuries extended a selloff as investors digested better-than-expected US labor-market data and prepared for a rush of US government bond issuance next week. Equity benchmarks in Japan, Australia, South Korea and Hong Kong all declined, while those in mainland China were little changed. Taiwan’s markets are shut due to the approach of a typhoon.
FTSE 100 technical analysis - Will the FTSE 100 climb today?
Quite the leg down from the 7720 level on Monday as the bad news drives the bears. That said the 7520 level acted as support yesterday and 7515 is the key fib for today. We may well see a bit of buy the rumour sell the news today as well as we have the Bank of England interest rate news at midday, with another rise of 0.25% expected.
Or will they pause the rises as recently mortgage companies have dropped their rates slightly on the shorter 2-year fixes... do they know that we may skip a rise this month? Rather than keep turning the screws, maybe let the recent increases in rates work their way through over the summer? As expected December 2022 was peak inflation (hence all the strikes around that time to lock in the payrises) and it has certainly dipped back a little bit since then.
For today we have that 7515 as first support, with 7492 S1 below that. We are also still testing the bottom of the Raff channels, with the 20d first up as I write this at 7535, and then 7512 for the 10 day support.
7576 is the first resistance level of note with the daily pivot here, and a rise to that this morning looks distinctly possible. If the bulls are able to break above this then I would expect a climb to the cluster of resistance at the 7623 area, where we have the key fib, R1 and the 30m 200ema.
This level would be worth a short as well, just in case the bearish sentiment kicks in again, or the markets get spooked by the BoE.
The 2h chart remains bearish as you would expect, with the 7600 locking in as the Hull MA resistance, but a rise to this or just above makes sense. The S&P500 may well try and defend the drop today and the 4500 level may well hold as support, which would help other markets to climb as well. The Fitch downgrade news will fade into the background now too...
With everything testing the bottom of the Raff channels, and given the recent rises (7th July we were at 7230!) that may well have got a bit over excited, the pull back was slightly inevitable, and as such, if we continue to follow seasonality, would suggest more upside to end the year. Probably see that 8000 level again before too long too!
So for today I am thinking a rise and then a dip, and I would like to see the 7500 to 7515 hold as support. If the S&P500 can break 4550 as well then that bodes well for a more bullish 24hours coming up too.
Good luck today.
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