Technical analysis for FTSE 100 for 14th February 2024
The main UK stock indexes suffered sharp falls on Tuesday after hotter-than-expected U.S. inflation numbers and domestic wages data prompted investors to scale back expectations of early interest rate cuts this year.
The blue-chip FTSE 100 closed down 0.8%, its biggest one-day selloff in almost a month.
Britain's rate-sensitive homebuilders tumbled 4.0% and REITs fell 2.4%, leading losses among the FTSE 350 subsectors.
U.S. and European government bond yields surged after a report showed consumer inflation stayed elevated last month, smashing market expectations of imminent interest rate cuts by the Federal Reserve.
Data earlier showed British wage growth slowed by less than forecast in the three months to the end of 2023, pushing investors to price in the first quarter-point rate cut from the Bank of England no sooner than June.
All eyes will be on the UK inflation numbers on Wednesday.
Asia
Asian shares tracked a negative lead from Wall Street on Wednesday, while the dollar and Treasury yields jumped as traders pared back expectations for the pace and scale of rate cuts by the Federal Reserve this year.
The latest shift in rate expectations came after an upside surprise in U.S. inflation on Tuesday which showed the consumer price index (CPI) rising 3.1% on an annual basis, above forecasts for a 2.9% increase.
Futures now point to about 87 basis points of easing priced in for the Fed this year, as compared to 110 bps prior to the data release and 160 bps at the end of last year.
That kept pressure on global stocks, which had rallied strongly towards the end of last year on aggressive bets for rate cuts by major central banks globally in 2024.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.8% in early Asia trade and was headed for a fifth straight day of losses.
S&P 500 futures and Nasdaq futures were trading near flat. EUROSTOXX 50 futures lost 0.3%.
The prospect that U.S. rates are likely to stay elevated for longer than initially expected pushed the benchmark 10-year Treasury yield to an over two-month high of 4.3320% on Wednesday.
FTSE 100 technical analysis for today, 14th February 2024
Hot on the heels of the US CPI we have UK inflation coming in the same as last month. It hasn't gone up, but as it hasn't dropped either so rates are unlikely to change here any time soon either. As such we may well see a rise towards the 7560 first key resistance area in place for today, and with the R1, key fib and 30m 200ema here, this area looks to be worth a short.
Above that then the bulls will be aiming for 7600 again, with 7620 remaining in play for the moment as well, though that may be a big ask. 7595 is also the daily 25ema on the now bearish looking daily chart following the EMA cross over on Monday.
Yesterday saw a proper bear Tuesday, especially in the USA, with the S&P500 falling 100 points at one stage. A fight back at the end to limit the damage has set up a rise and dip for today with another test of the 5000 to 5020 area, where we have a cluster of resistance levels.
That may well help the FTSE 100 also have a rise and dip.
Support wise, then 7450 is the main area to start with, and we have the key fib here, as well as the 10d Raff channel bottom. That is also just below the 20d Raff channel bottom at 7472, so any dip is likely to be defended by the bulls today. There will also be a few trapped bulls around the 7560 area from yesterday that will be keen to close and get out. This was the 200ema on the daily yesterday and would have seen a few longs entered here.
Gold declining also lends weight to an uptick on indices in the short term. As mentioned yesterday though do keep an eye on the seasonality which has a weaker second half of February.
Basically looking at the 7560 and 7595 levels as the main resistance, with 7450 as the main support for today.
Good luck!
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