Technical analysis for FTSE 100 for 19th September 2024
British stock indexes dropped on Wednesday as investors reined in bets on interest rate cuts by the Bank of England, while global risk sentiment was fragile ahead of a policy decision from the U.S. Federal Reserve later in the day.
The blue-chip FTSE 100 ended 0.7% lower, racking up the steepest losses among European peers, while an index of midcap stocks was down 0.5%. Both the indexes closed at their highest since early September on Tuesday.
UK annual consumer price inflation was steady at 2.2% in August, in line with forecasts, data showed. However, services inflation - a figure closely watched by the Bank of England - rose to 5.6%, slightly more than forecast.
The British pound rose against the dollar following the inflation data, which further pressured the FTSE 100's export-focused companies.
Evidence of persistent inflationary pressures led traders to trim bets on the BoE cutting rates at its Thursday meeting, where policymakers are expected to keep rates on hold.
Asia & Overnight
The dollar bounced, long-dated bond yields were up and Asian stocks rose after the U.S. Federal Reserve announced a 50-basis-point rate cut and flagged that its easing cycle would be measured.
The S&P 500 hit a record high overnight and although it closed slightly lower, futures rose 0.67% in the Asia day. Nasdaq futures were up 1%. Japan's Nikkei jumped 2.5% and stock markets in Australia and Indonesia hit record highs.
The Fed lowered its window for the benchmark policy rate by 50 basis points to 4.75-5%, where traders had been leaning before the decision. The dollar immediately hit a two-and-a-half-year low on sterling, but then recoiled sharply.
The Fed's cut is expected to support spending and the U.S. economy, and encourage other central banks to cut rates.
Oil prices fell and benchmark Brent crude futures were last down 0.3% at $73.42 a barrel.
Around the region lower U.S. rates in theory give emerging markets leeway to cut their policy rates to support growth. Bank Indonesia moved a few hours before the Fed, with a 25-basis-point cut on Wednesday.
The Bank of England meets later on Thursday and is seen holding rates at 5%, especially after inflation figures showed services inflation picked up in August. The Bank of Japan sets policy on Friday, and is expected to stand pat but line up future hikes, perhaps as soon as October.
FTSE 100 technical analysis for today, 19th September 2024
Today it's the BoE's turn, but no rate cut expected this time, as inflation is still being stubborn. They may well want to wait till next month and see if the economic situation has deteriorated or not... As such we may well see a dip and rise again today, as some profits get banked having bought the dip as expected yesterday.
We are looking to open at around the key fib level at 8326 which may well then see us drop down to the key supports at the 8270 area, where we have the daily pivot, 200ema and 30m coral as well. I would like to see any test of this level hold as that should then set up a bounce towards the 8350 level again and a double top with the recent high.
Above 8350 then the bulls will be aiming for the 8402 resistance level, with a likely stutter at 8378 R3 on the way. The BoE news is out at midday, along with the meeting minutes, followed by the BoE letter at 12:30. Expect some volatility in the run up to midday.
If the bulls were to break above the 8400 level (though I am not expecting that as we also have the top of both the Raff channels around here) then the 8450 area would be next up. Probably a big ask for today though!
Support wise, 8270 to start with as mentioned, but if the bears were to break below this then we still have the 8200 area as ultimate lower support. However S1 is 8243 and would likely hold given the bullish sentiment that kicked in yesterday. The 2h chart is also on the cusp of going bullish which would also lock in the 8300 as support from the Hull MA.
So, thinking a dip and rise again today. Good luck.
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