Never miss a story from Alejandro Zambrano

Subscribe to recieve updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from Daily FX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to Alejandro Zambrano

You can manage you subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

The FTSE 100 (FXCM: UK100) is higher by 1.25% as of writing. All sectors are in fact higher with the Energy and Basic Materials Sector leading the way. The current rally is a continuation of the bullish bias supported by the dovish tone at yesterday’s ECB meeting and the markets are now pricing in a 90% likelihood of a 10 bps reduction in the deposit rate by March.

The slump in crude oil, downside risks to inflation and emerging markets are all factors keeping the ECB on their toes, Draghi stating that the “policy stance will need to be reviewed in March.” The situation is comparable to the October 2015 meeting, and at the subsequent rate meeting the ECB did indeed cut rates.

The FTSE 100 is also supported by a Nikkei Asian Review article published late yesterday evening. It suggests that the Bank of Japan, which will host a rate meeting starting January 28, is taking a serious look at expanding its monetary easing as soft oil prices make it hard for the central bank to reach its 2% inflation target.

Technical Perspective

The FTSE 100 needs to breach Tuesday’s high of 5917 to end its bearish momentum. This seems likely with the DAX 30 already having ended its downward trend. If Tuesday’s high of 5917 is reached, the market will most likely aim for the January 14 high of 6000. However, entering long positions on a break today will require a stop below the 5656 support level and this would impair the risk/reward ratio. My preferred setup would rather be a pullback to the support level post a break.

With the ongoing crisis in the U.S manufacturing sector, today’s Markit U.S. Manufacturing PMI for January will be crucial. The market anticipates an outcome of 51 from 51.2 in the month prior and a higher than expected reading should most certainly ease expectations of a major slowdown impacting the U.S. economy.

Losing Money Trading? This Might Be Why

FTSE 100 | FXCM: UK100

Please add a description for the image.

Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano

--- Written by Alejandro Zambrano, Market Analyst for DailyFX.com

Contact and follow Alejandro on Twitter: @AlexFX00

Struggling with Trading? Join a London Seminar

Get Alejandro’s daily market update in your inbox, please fill out this form