Technical analysis for FTSE 100 for 21st May 2024
London equities managed to eke out some gains on Monday after two consecutive sessions of losses, helped by a rally among metal miners and defence stocks, while investors awaited a key domestic inflation reading later in the week.
The blue-chip FTSE 100 shook off its recent slump to climb 0.1% while the mid-cap FTSE 250 closed 0.6% higher, at its highest in over two years.
Meanwhile, Deputy Governor Ben Broadbent said on Monday the Bank of England could cut interest rates in the next few months, depending on how rapidly the knock-on impact on wage growth and prices from 2022's surge in inflation eases.
Investors will be watching the crucial consumer price index (CPI) reading on Wednesday, alongside quarterly results from American chipmaker Nvidia.
Asia and Overnight
Asian stocks drifted lower while the dollar held firm on Tuesday as investors awaited minutes of the Federal Reserve's latest policy meeting to gauge the timing and extent of possible interest rate cuts this year.
Asian stocks drifted lower while the dollar held firm on Tuesday as investors awaited minutes of the Federal Reserve's latest policy meeting to gauge the timing and extent of possible interest rate cuts this year.
Japan's tech-heavy Nikkei edged higher though, driven by chip shares after the Nasdaq hit a record high overnight ahead of Nvidia earnings due on Wednesday.
Gold inched back towards Monday's all-time peak, while crude oil prices eased on worries of U.S. interest rates staying high for longer as Fed officials maintained a cautious view on a recent easing of inflation.
Cryptocurrencies ether and bitcoin climbed to new six-week highs amid speculation that the U.S. Securities and Exchange Commission (SEC) may approve a spot ether exchange-traded fund (ETF).
Markets currently factor in about 41 basis points of Fed rate reductions this year, with a quarter-point cut fully priced in for November.
Traders rushed to rebuild easing bets after data earlier this month showed consumer price pressures mitigated in April, following a string of three months of upside surprises at the start of the year.
Even so, Fed officials are reluctant to declare inflation is coming under control, with Vice Chair Philip Jefferson saying on Monday that it was too early to tell if the slowdown is "long lasting," and Vice Chair Michael Barr saying restrictive policy needs more time.
MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.6%, weighed down by the Hang Seng's more than 1% pullback from Monday's multi-month peak.
Japan's Nikkei was a rare bright spot, rising 0.2%, adding to the previous day's 0.73% rally.
Nasdaq futures inched 0.1% lower after the cash index climbed 0.65% overnight to close at an all-time high. S&P 500 futures were flat after Monday's 0.1% gain.
FTSE 100 technical analysis for today, 21st May 2024
We have tested the key daily support level at 8365 overnight and a bounce is underway as I write this, while the bulls will be keen to get the price back above the 8400 level. Ergo a rise towards the initial resistance area at the 8420 level may well play out to start with. Was a bit choppy yesterday but it has made the 2h chart go bearish (setting up a bear Tuesday possibly) and has Hull MA resistance at the 8420 level as well.
With the daily pivot, 200ema and 30m coral all here as well, this will be the first hurdle for the bulls to jump. If they managed to do so then a rise to retest yesterday's high at 8450 would likely materialise, and I am still looking at the 8470 and 8495 levels above that.
On the flip side, if the bears were to break below the 8360 level then a slide down towards 8330 and a test of the S3 level here may well play out.
We also have the UK CPI reading out tomorrow and traders are awaiting that as it may well give clues on the future of interest rates. Rumblings of summer cuts still in the background (and a pre election news story). The forecast for CPI is a drop to 2.1% which Rishi Sunak will be hoping for as it brings the 2% target a bit closer. Core Inflation is due to drop to 3.6%.
A rise and dip day feels like it may well be on the cards today, and it will be interesting to see of the bulls can defend the 8360 level. With the bottom of the 10d Raff channel here they will be keen to keep their momentum going. A slight spanner in the works is HSBC coming out with the headline "buy UK shares" which is usually a warning sign we are near the top though!
Looking across to the Dax40 and S&P500, a rise and dip looks possible there too. I am looking at resistance at the 18750 and 5322 levels as fairly key respectively so watch out for these. The Dax40 2h chart has gone bearish also with the drop off yesterday and the Hull MA is showing that resistance level.
Good luck today; let's see if the bulls fight back initially....
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