Technical analysis for FTSE 100 for 31st January 2024
Britain's main stock indexes closed at near three-week highs on Tuesday, boosted by largely upbeat earnings reports led by advertising firm WPP and signs of easing price pressures. The exporter-heavy FTSE 100 rose 0.4% and the domestically focussed FTSE 250added 0.2%. WPP rose 1.9% after it forecast a 2023 operating profit margin at the top end of its previous guidance.
The British Retail Consortium said prices at shops this month rose at the slowest annual pace since May 2022, adding to signs of easing inflationary pressures ahead of the Bank of England's (BoE) policy decision on Thursday.
The BoE is seen holding interest rates, and it is a close call whether the central bank will start trimming borrowing costs next quarter or in July-September, a Reuters poll found.
The indexes were also boosted by a record close for New York's S&P 500 on Monday ahead of this week's slew of megacap U.S. earnings, economic data and the Federal Reserve's monetary policy meeting.
The International Monetary Fund cut its growth forecast for Britain for 2025 on Tuesday by 0.4 percentage points to 1.6%. The GDP growth is seen at 0.5% in 2023 and 0.6% in 2024.
Bets on monetary policies drove Asian markets, with stocks edging lower as traders wait on the Federal Reserve meeting later Wednesday. Bond traders have lowered bets on US rate cuts this year, with the odds of a reduction in March dropping to about one-in-three. Sentiment was also sapped by poor economic data from China and a fourth straight quarter of profit decline for Samsung Electronics Co., the world’s biggest memory chipmaker, adding to the drum-roll of disappointing US tech earnings.
Asian shares fell broadly on Wednesday, while the Australian dollar slid after surprisingly soft domestic inflation data and short-dated Treasury yields stayed elevated ahead of a rate decision from the Federal Reserve. Chinese markets wobbled after an official factory survey showed China's manufacturing activity in January contracted for a fourth straight month.
FTSE 100 technical analysis for today, 31st January 2024
Well today's big event will be the Fed later at 7pm, though I expect, and the forecast is, for the rates to remain at 5.5%. The press release after at 19:30 will be more closely watched for clues as to future moves and when cuts will be likely. So expect some volatility around that time.
In the meantime, I think that we will see the bulls come out fighting today and continue to build on the strength. Initial support is at the daily pivot at the 7662 level and I would like to see this hold.
If the bears were to break this thought then a slide down to the 7620 area would probably play out, and we have a cluster of supports here - the 30m 200ema, S2 and the key fib. As such a long here is also worth a go if seen.
I expect we will probably see a day of buy the rumour sell the news as we head towards the Fed later though.
Resistance wise, 7680 is first up with the red 30m coral here, and also 7683 for R1. However the bulls are likely to break through this quite easily and a rise towards the 7705 area looks likely to start with. 7706 is R2 and then 7712 for the top of the 20d Raff. The 10d Raff channel is now firmly heading up on the daily chart and the EMA crossover that was brewing yesterday has now locked in with support at the 7600 level.
Ultimately today I think we will see a rise towards the 7730 level, and with R3 at 7727, and that daily resistance level at 7738 we could see a stutter here. That said the bulls will be keen to hold on above the 7700 level if they do manage that.
The US markets have dropped slightly having set the record highs once again, and the 4900 level on the S&P500 will need to be defended today for a push up towards the 4923 or higher level. We have 2h Hull MA resistance here for today. That Raff channels on the daily continue to head up though keeping the bulls in the driving seat.
Good luck today.
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