FTSE 100 technical analysis for 10th August 2023
US CPI 4.8% forecasted
The FTSE 100 closed higher Wednesday following a sharp rally in energy and mining stocks after Chinese deflation spurred hopes of more stimulus, while upbeat bluechip earnings also boosted sentiment.
Asian stocks lost ground on Thursday, still hurting from China’s slip into deflation, with investors particularly cautious ahead of a crucial U.S. inflation report that will likely influence the Federal Reserve’s monetary policy path.
Chinese data on Wednesday showing deflation at the consumer-price level and further declines for factory-gate prices in July have only exacerbated concerns about the sputtering nature of the country’s post-pandemic recovery. China is the first G20 economy to report a year-on-year decline in consumer prices since Japan’s last negative headline CPI reading in August 2021.
FTSE 100 technical analysis - US CPI 4.8% forecasted
More sideways chop really and the large dividend helped the bulls to push to the 7600 level. They couldn't hold it though and promptly dropped back to the 7550 level again. However, ahead of the US CPI out at 1330 today (and probably after if the news is seen as favourable) we could see another push from the bulls today. The angle is still that inflation is falling which may well halt or slow down the rate rises.
Initial resistance for the FTSE100 is at the 7601 level where we have yesterday's high and also R1 for today. We could see a dip and rise play out today if the bears have another go here, for a drop down to the 7540 support level where we have S1 and also just above the now green 2h coral at 7530. Should we drop to this level then a hold of this bodes well for more strength over the next few sessions.
Above 7601 then the bulls will likely aim for 7632 to test R2 and also the 7625 key fib level. I expect a stutter here if seen, especially if prior to the news. That is also just below the 10d Raff channel top, currently at the 7655 level, so we may well see any rises later in this area.
Below the 7540 level then the bears would likely manage 7523 for a test of the key fib, though it may need the news to be badly received at 1330 for the drop to start to gain momentum.
The S&P500 is likely to lead the way and defend any drops, as it may well want to push up and past the 4500 level. 4520 has been recent resistance on that so likely to see more here, though a break of this should see R2 at 4567 in due course (nice number!)
So, it's all eyes on the CPI news at 1330, watch for 7600 and 7630 as resistance, and 7540 as support.
Good luck today.
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