Technical analysis for FTSE 100 for 20th September 2024
The UK's benchmark stock indexes ended higher on Thursday, after the Bank of England kept rates on hold, as widely expected, and extended its bond reduction plan for another year.
The blue-chip FTSE 100 was up 0.9%, while the mid-caps gained 1.6%. Both indexes touched their highest levels in over two weeks.
BoE policymakers voted 8-1 to keep benchmark rates on hold at 5%, though Governor Andrew Bailey said cooling inflation pressure meant the BoE should be able to cut interest rates gradually over the months ahead.
They also voted to run down the bank's stock of British government bonds by another 100 billion pounds over the coming year. The British pound touched its highest since March 2022 after the decision.
After easing policy in August, BoE policymakers continued to grapple with rising inflation. A report on Wednesday showed a quickening pace of inflation in the services sector.
UK rates are now expected to come down at a slower pace than in the euro zone and the United States. The Fed eased interest rates by a larger-than-usual 50 basis points on Wednesday, with Chair Jerome Powell citing easing inflation and a need to support the labour market.
UK stocks continue to lag developed market counterparts, with the FTSE 100 up 7.7% year to date versus the S&P 500's 19.8% and the STOXX 600's 8.9% gains.
Asia & Overnight
Asian shares extended their rally on Friday, bathing in the afterglow of an outsized interest rate cut in the United States, while the yen edged higher as the Bank of Japan held rates steady and stayed upbeat on the economy.
In China, the central bank kept its benchmark lending rates on hold, countering expectations for a move lower. Chinese shares were an outlier in the region, with blue chips down 0.3%. The onshore yuan strengthened to the highest in nearly 16 months, leading to intervention by state banks to prevent it from appreciating too fast.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.7% to the highest in two months, tracking overnight gains on Wall Street. The index was headed for a weekly gain of 2.5%.
The Nikkei jumped 2.1%, helped in part by a weaker yen as bulls took some profit from the recent rally to 14-month highs. It is up 3.5% for the week. Nikkei futures were largely unmoved by the BOJ decision.
Overnight, Wall Street finally had the time to digest the Federal Reserve's first rate cut. With more easing to come, investors are wagering on continued U.S. economic growth, and better-than-expected jobless claims data added to the view that the labour market remained healthy.
Markets imply a 40% chance the Fed will cut by another 50 basis points in November and have 73 basis points priced in by year-end. Rates are seen at 2.85% by the end of 2025, which is now thought to be the Fed's estimate of neutral.
U.S. stock futures were slightly lower on Friday. The S&P 500 and Dow Jones Industrial Average surged to a record close on Thursday, while Nasdaq jumped 2.5%, spearheaded by tech shares.
FTSE 100 technical analysis for today, 20th September 2024
As expected the BoE kept rates unchanged with scope to reduce next month instead. Retail sales have just come in positive, beating expectations, which could help the FTSE100 rise and dip today, with some profit taking ahead of the weekend. The US had a decent bullish performance yesterday, with the S&P500 hitting the 5730 area and some new record highs in the process.
For today we have key support at the 8270 level to start with and I would like to see this hold if tested for a rise towards the 8330 area.
If the bears break 8270 though, we will likely see a slide down to 8220-8230 where we have S2 and the daily support zone as well. With the daily chart still bullish and the 10d Raff channel still rising (8260 support from that today) we may well see the bulls in the driving seat to start with.
8330 as mentioned is key resistance to start with as we have the daily pivot, 30m coral (red) and 2h Hull MA all around here. As such we may well see the price fail to really push on past this today. If it were to do so though then the 8374 level is the next one to look for as we have R1 and the daily resistance here. Worth a short here if it were to get that high today.
Being a typical Friday I expect it will probably be odd, though a rise and dip would make sense and fit the charts well. The US futures prices have cooled off a bit from the highs yesterday though with the positive 2h chart on the S&P500, we may well see the dip down to the 5700 area hold. The bulls will certainly be keen to defend that round number as well.
So look for a range today between 8270 and 8330 - can always trade breakouts either side of this too
Good luck and I hope you have a great weekend.
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