FTSE 100 Analysis and Talking Points
- Chair Powell’s Press Takes Centre Stage With Fed Expected to Hike 75bps
- FTSE 100 Nears Key Pivot
FTSE 100:Today’s focus for traders will be firmly on the Federal Reserve rate decision and more specifically Fed Chair Powell’s press conference. Heading into the meeting the expectation is for the Fed to deliver a back-to-back 75bps rate hike, taking the Fed Funds Rate to the previous cycle high. However, it will be Chair Powell’s comments regarding the rate outlook that will be the key driver for markets and given the recent slowdown in economic activity there is a growing sense that the Fed could soften its tone. In my view, I still see the Fed sticking to its aggressive hawkish stance, particularly as headline CPI has yet to have peaked. As we have seen previously with the Fed still doing QE back in March, the Fed can be slow to pivot and thus with Fed Officials laser-focused on lagging inflation data, this will remain the case. As such, even if the Fed Chair backs away from a 100bps consideration can prompt a bid in equities, as seen at the last two meetings, gains have often been short-lived.
S&P 500 Chart: Daily Time Frame
Source: Refinitiv
That being said, I still lean bearish equities, which brings me to the FTSE 100. The index has performed significantly better than its major counterparts thanks to the lack of tech stocks and its larger exposure to the commodity sector. However, as economic activity slows globally, the rising risk of a recession will likely weigh much more heavily on commodities and by extension the FTSE 100. From a technical standpoint, the 200DMA (7360) has been a big pivot area for the index, capping recent upside. What’s more, the index has also failed to close above the 200DMA since the shocking US CPI print released in June. As such, for those bearish on the index, the 200DMA can be a good area to lean against.
FTSE 100 Chart: Daily Time Frame
Source: Refinitiv
| Change in | Longs | Shorts | OI |
| Daily | 48% | -3% | 6% |
| Weekly | -11% | 50% | 28% |
Further reading
US Dollar, EUR/USD, AUD/USD Price Action: Fed, Q2 GDP and CPI In Focus
