Technical analysis for FTSE 100 for 2nd February 2024
UK stocks hit a one-week low on Thursday after the Bank of England (BoE) kept interest rates at a 16-year high and said it would need more evidence that inflation is set to fall to its 2% target before cutting rates.
The blue-chip FTSE 100 was down 0.1%, but was up as much as 0.6% before the central bank's decision.
British government bond yields rose and the pound cut some of its earlier losses.
Shares of investment banking and brokerage services were the top losers, falling 2.7%, while rate-sensitive banks and real estate stocks slipped 1.1% and 1.6%, respectively.
The BoE said it would "keep under review for how long Bank Rate should be maintained at its current level". Officials at the U.S. Federal Reserve and European Central Bank have been more explicit that rate cuts are on the agenda.
Both the FTSE indexes ended January with their worst monthly performance since October 2023, as investors reined in bets of aggressive interest rate cuts this year.
Wall Street closed sharply lower on Wednesday after the Fed held interest rates steady, while dashing hopes for a cut as soon as March
Most Asian equity benchmarks advanced as a rebound in US shares extended into after-hours trading after a set of bumper results from tech giants. Gauges in Australia and Japan climbed, while Chinese stocks retreated. South Korea’s Kospi index was on track for its biggest weekly gain since 2022. US equity futures were in the green after both the S&P 500 Index and the tech-heavy Nasdaq 100 Index rose over 1% on Thursday.
Asian shares were buoyed by a late bounce in U.S. tech on Friday as results from Meta and Amazon beat expectations, while investors are bracing for U.S. jobs figures, which could hasten bets for rate cuts if they come in below forecast. The risk rally is set to spill over to European markets, with EUROSTOXX 50 futures up 0.9%. S&P 500 futures extended gains to be up 1% while S&P 500 futures rose 0.5%.
For now, investors are mostly waiting for U.S. payrolls data on Friday. Economists expect the U.S. economy added 180,000 new jobs in January, while the jobless rate ticked up to 3.8% from 3.7%.
In energy markets, oil prices recouped some losses from the previous day following a decision by OPEC+ to keep its oil output policy unchanged, though they are still headed for weekly losses. Brent crude futures rose 0.6% to $79.15 a barrel, after falling more than 2% the previous day, and U.S. West Texas Intermediate crude gained 0.5% to $74.2 a barrel.
FTSE 100 technical analysis for today, 2nd February 2024
The US bulls fought back well yesterday and the FTSE100 defined the drops down towards the 7600 level. As expected rates remained at 5.25% and again as mentioned yesterday, the outlook doesn't infer cuts anytime soon. Overnight the bulls have held on still, ahead of NFP later at 1330. The forecast is 180k, along with the unemployment rate ticking up to 3.8%.
The FTSE100 2h chart is just on the cusp of going bullish, and it feels like the bulls will be keen too push above the 7700 level today. But NFP Fridays can often be weird, and a good day to be a bit more risk off. Initially I am thinking that we will see a rise towards the 7699 key fib and the round number, before a drop back to the support area at 7650.
We have the daily pivot, 30m coral and the 200ema all here so it would be good to see this hold to tee up a bounce.
A break of 7645 though and we would likely see a slide down to the daily support level at 7606 where we have the 25ema. It's been a bit choppy recently but that would be the first test off that MA since its changed back to a bullish trend, so in theory should be a decent support. Higher up we also have the bottom of the 10d Raff at 7623.
A break below that and I would be looking at 7570 to hold as the next support though not expecting ti to get that low today. Might be a level for next week though!
Resistance wise today then 7700 as mentioned and ultimately a test of 7735 may well play out, especially if the US bulls continue apace. For the first time ever I have an S&P500 resistance level above 5000 (R3 at 5054) which shows how strong this bull run is on the US markets.
Above 7735 then we have the top of the 20d Raff at 7755, and ultimately 7850 as a daily resistance level but unlikely today. I do think we will see 8300 at some point this year though.
So, few decent levels in play. Don't forget NFP at 1330.
Good luck and have a great weekend!
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