Technical analysis for FTSE 100 for 1st February 2024
The UK's blue-chip index fell on Wednesday, hurt by losses in energy shares and Vodafone. The blue-chip FTSE 100 slipped 0.5%, with heavyweights Shell and BP weighing on the index with a 1% slide, tracking oil prices lower. UK stocks logged their worst month since October as investors scaled back bets of aggressive interest rate cuts from major central banks, with concerns about China's slowing economy adding to the gloom.
The Bank of England is set to release its policy decision on Thursday.
Meanwhile, British house prices rose more than economists had expected in January, adding to signs that the squeeze from high interest rates is beginning to ease
The Federal Reserve has held interest rates at 5.25 to 5.5pc while warning that it is too early to get hopeful about rate cuts. It comes as traders on Thursday will be watching the Bank of England closely as its rate-setters vote on whether to start bringing down borrowing costs from a 16-year-high.
The US central bank said that even as several indicators point to easing price pressures, it can not yet declare victory in the battle against inflation. The Fed said in a statement: “The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.” The central bank reiterated warnings that it was prepared to adjust interest rates “if risks emerge”.
It comes after inflation rose by more than anticipated in December to 3.4pc amid higher costs for housing, eating out and car insurance.
China stocks gained as an official signaled potential spending plans, while shares in other Asian markets fell after disappointing US earnings reports and Federal Reserve pushback on interest-rate-cut expectations.
China’s CSI 300 swung to gains after a four-day slump, while Hong Kong’s Hang Seng Index advanced after a two-day decline. The Caixin manufacturing PMI gauge came in as expected, in expansion territory, and an official in Beijing said the government would set a “reasonable” size for investment.
Asian shares steadied on Thursday as Chinese stocks eked out rare gains, while investors stuck to bets for sizable cuts in U.S. interest rates this year even if the kick off might now be a little later than first hoped.
FTSE 100 technical analysis for today, 1st February 2024
And after the Fed comes the BoE and once again I expect they will hold rates at 5.25%. No reason to cut them just yet really. Equally they won't want to raise them further while inflation has fallen, mainly as the optics wouldn't look very good!
For today I am thinking a dip rise dip to play out, and am looking at initial support at the 7582 level where we have S1 and the key fib. It's the start of the month so there will be an inflow of new month money to start things off. That should see a rise towards the daily pivot level at the 7638 price, and with the red 30m coral also here, this may be a tough one for the bulls to crack to start with.
Continue to bear in mind the average seasonality as well here
Below the 7582 level then 7550 would be the next level of note with S2 and the daily 200ema here. Should it get that low then I would like to see that level hold for a bit more upside during February. The daily chart is still just about bullish and also has the 25ema support to be tested at 7596 - it may overshoot this and then snap back and it will be interesting to see if the bulls defend well today.
On the bullish side, then the pivot as mentioned and then above that the 7680-7690 area would see a test of the two 2h resistance levels that are in play from the Hull MA and the coral. 7685 is also the key fib for today so a few things here. It feels like it might be a big ask to get that high today though, given the bearish end to the US session yesterday.
That said, with the S&P500 2h chart looking bearish as well and strong resistance at 4900 and 4916 we may well see a rise to these level get a bearish reaction as well.
The BoE news at 12 will be the thing to watch, followed by the US ISM at 3pm.
Good luck today.
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