Technical analysis for FTSE 100 for 5th April 2024
British stocks ended higher on Thursday, helped by auto stocks and mining shares, while data showing the domestic economy was on the verge of exiting recession further aided the mood. The blue-chip FTSE 100 rose 0.5% to close at its highest level since Feb 2023, while the more domestically focused FTSE 250 gained 0.6%.
The automobiles and parts index led sectoral gains with a 2.4% rise after data showed Britain's new car market recorded the best March since 2019 on the back of steady demand for fleet vehicles. Precious metal miners gained 1.4% as the bullion scaled a fresh record high, while industrial metal miners rose 1.6% as copper prices rose to a 14-month high.
The commodity-heavy FTSE 100 index has recently benefited from a rally in copper, gold and oil prices, although it lags other developed economy peers which have clinched record highs this year.
Data indicating a U.S. soft landing and China recovery combined with a weaker Sterling should continue to boost UK exporters. The Bank of England is expected to follow other major central banks and cut interest rates in June or August as the latest data indicated an improving economy.
Two separate surveys on Thursday showed British companies' were expecting selling prices and wage increases to cool in the year ahead in March, while the British economy looked on track to exit recession when official growth data is next published.
Overnight
European stocks are in for a rocky start on Friday with futures pointing to the sharpest daily percentage fall in months, rattled by escalating tensions in the Middle East. Israeli Prime Minister Benjamin Netanyahu's comments that the country would harm "whoever harms us or plans to harm us" stoked fears of a wider war. Israel is bracing for the possibility of a retaliatory attack for Monday's presumed Israeli air strike on Iran's embassy.
That took the shine off Wall Street's stellar run in a late fall on Thursday, which left Asian shares a sea of red and sent oil prices jumping.
Europe's unlikely to be spared too, with the EURO STOXX 50 index futures already down more than 1.5% - a large move for Asian time.
Britain's FTSE futures likewise fell more than 1.4%.
Asia
Asian shares retreated on Friday as hawkish comments from some Federal Reserve officials and escalating geopolitical tensions put a dent in risk sentiment, while traders were also cautious ahead of U.S. jobs data due later in the day.
The threat of supply disruptions owing to a prolonged conflict in the Middle East kept Brent futures above $90 a barrel - a level not seen since last October.
Israel had on Thursday braced for a possible retaliatory attack after its suspected killing of Iranian generals in Damascus this week, and Prime Minister Benjamin Netanyahu said the country would harm "whoever harms us or plans to harm us".
In a later call with Netanyahu, U.S. President Joe Biden threatened to condition support for Israel's offensive in Gaza on it taking steps to protect aid workers and civilians.
USA
Traders were hesitant to take on new positions ahead of Friday's closely-watched U.S. nonfarm payrolls report, which will feed into expectations for the Fed's rate outlook.
A slew of solid U.S. economic data out this week has stoked doubts about the pace and scale of Fed easing. A cooling U.S. services sector and comments from Fed Chair Jerome Powell this week, however, reinforced the view that rate cuts were likely to commence at some point this year.
Some other Fed officials have taken a more conservative view on the amount of easing required in light of a still-resilient U.S. economy, with Minneapolis Fed President Neel Kashkari, in particular, striking a more hawkish stance overnight.
Richmond Fed President Thomas Barkin also said on Thursday the U.S. central bank has "time for the clouds to clear" on inflation before starting to cut interest rates. Chicago Fed President Austan Goolsbeecited housing price pressures as the "biggest danger" on inflation.
FTSE 100 technical analysis for today, 5th April 2024
Well that all got a bit bearish after hours as the USA talked it down, and conveniently ahead of the NFP data today - drive it down to get a better buy price? For today we have the main support at the 7850 level and a hold of this may well see a climb towards the first main resistance level at 7930. We have a cluster of resistance indicators here, namely the pivot, the 30m 200ema and coral.
We may well see a short squeeze/dead cat bounce today for a test of this, and if so the bears may well appear here again. This is also the Hull MA resistance on the 2h chart now.
Above the 7930 level then the next level of note is at the 7970 where we have R1 and the key fib. With the FTSE starting the day -100 already we usually get a bounce to start things off as it will retrace some of that out of hours fall. The S&P500 has also stabilised at the 5145 level, just below the key 5150 support. Again, we may see a short squeeze on that.
With the drop we are testing the bottom of the 20d Raff channels on the FTSE100, S&P500 and Dax40 - is this just a pull back in the continued bullishness or the start of a more prolonged downturn? Tension ramping up in the Middle East again and markets that were already jittery....
If the bears were to break it below the 7850 level then the next support is at 7809 and the bottom of the 10d Raff just below this at the 7795 level. Given the fall should it get this low then the bulls will be keen to defend this.
Don't forget that we have NFP data out today at 1330 and that may well lend some weight to a buy the rumour pattern... also tallying with a short squeeze. The forecast is for a drop to 200k from 275k previously, while the unemployment rate is to remain at 3.9%.
Slight bit of caution today as it is NFP Friday but I am expecting it to climb initially.
Good luck today and have a great weekend.
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