Technical analysis for FTSE 100 for 1st July 2024
British equities ended the week on a sour note after stronger-than-expected GDP data spurred worries over interest rate cuts by the Bank of England, while U.S. inflation reading for May boosted market sentiment.
The FTSE 100 slid 0.2% to logged its first monthly decline in four. However, the index was up for a fourth consecutive quarter. The midcap FTSE 250 index was also down 0.2%, logging weekly and monthly losses.
Britain's economy grew 0.7% in the first three months of this year, compared with the previous quarter, and came in above an estimate of 0.6% growth, official figures showed.
The figures came in as Britons are set to vote on July 4 in a parliamentary election, which opinion polls suggest will see Labour Party leader Keir Starmer replace Conservative Rishi Sunak as prime minister.
Asia & Overnight
Asian stocks were subdued on Monday as traders pondered the U.S rates outlook, while the euro rose after the first-round voting in France's shock snap election was won by the far-right, albeit with a smaller share than some polls had projected.
The shock vote has unsettled markets as the far-right, as well as the left-wing alliance that came second on Sunday, have pledged big spending increases at a time when France's high budget deficit has prompted the EU to recommend disciplinary steps.
On Monday, the euro was 0.32% higher, while European stock futures rose 1% and French OAT bond futures gained 0.15% as investors digested the better than feared results, although uncertainty remained.
Exit polls showed Marine Le Pen's National Rally (RN) winning around 34% of the vote, comfortably ahead of leftist and centrist rivals but the chances of eurosceptic, anti-immigrant RN winning power next week will depend on the political dealmaking by its rivals over the coming days.
In Asia, the MSCI's broadest index of Asia-Pacific shares outside Japan was 0.07% higher, to kick off the second half of the year having risen 7% so far in 2024. Japan's Nikkei rose 0.57%.
China stocks eased, with blue-stocks down 0.45%. Hong Kong's Hang Seng Index was flat.
A private sector survey on Monday showed China's manufacturing activity grew at the fastest pace in more than three years due to production gains, even as demand growth slowed. The Caixin/S&P Global manufacturing PMI data contrasted with an official PMI released on Sunday that showed a decline in manufacturing activity.
On the macro side, the spotlight remains on if and when the Federal Reserve will start cutting rates in the wake of data on Friday showing U.S. monthly inflation was unchanged in May.
In the 12 months through May, the PCE price index increased 2.6% after advancing 2.7% in April. Last month's inflation readings were in line with economists' expectations. They remain above the Fed's 2% target for inflation.
Still, markets are clinging to expectations of at least two rate cuts from the Fed this year with a cut in September pegged in at 63% probability, CME FedWatch tool showed.
U.S. stocks on Friday ended lower after an early rally fizzled.
In commodities, oil prices edged higher, with Brent futures 0.39% higher at $85.33 per barrel and U.S. West Texas Intermediate crude futures up 0.42% at $81.88.
French Election
Marine Le Pen’s National Rally dominated the first round of France’s legislative election and set its sights on an absolute majority as President Emmanuel Macron and her other opponents began strategizing to keep the far-right party out of power. The National Rally was projected to get about a third of the vote, according to projections from five polling companies on Sunday, eclipsing the left-wing New Popular Front coalition and Macron’s centrist alliance. Gains in the euro early Monday indicate investors anticipate Le Pen will fall short of an absolute majority in the next round of elections.
FTSE 100 technical analysis for today, 1st July 2024
Well here we go, new month and UK election week.... The bulls have fought back from the 8150 level on Friday and we are just nudging the 8200 level to start with this morning. We may well see some new month money flow in this morning, though with the 200ema on the 30m at 8210 as resistance to start with a dip and rise would make sense.
The CAC40 in France has climbed well so far this morning, allaying fears about Le Pen so far....
Above the 8210 level then the 2h coral is ay 8221 so pretty close, and presenting a couple of early hurdles for the bulls. Above that then Friday's high and our shorting level at 8240 is next up. That would set up a short term double top as well.
Above that then the R2 level at 8281, along with the daily resistance level at 8288 should see a decent reaction. As such, if we get a rise to this area then a short here is worth taking. The 10d daily Raff channel has also levelled off a bit now having been rising strongly, given the drop off the 8300 level last week. Conversely, the 20d daily channel has also levelled off having been declining steeply. Interesting picture, but we may well see some strength creeping in, though I am also expecting a bit of a holding pattern prior to the election results.
Support wise, the 8180 level looks viable to start with, as have the daily pivot and the 30m coral here, albeit still red, but if we hold above that for the next hour it should turn green.
Below the 8180 level then the 8142 S1 level ties in with Friday's low support area, and we also have the key fib at 8131.
Slightly lower down, and a level that I would expect to see a bounce from is 8120.... though I don't think we will get that low today. If we do a long here is worth a go though.
On the news front, we have the ISM manufacturing PMI out in the USA at 15:00.... small tick up to 49 forecasted.
Good luck today.
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