FTSE 100 Bid Following UK PMIs; Longer-Term Resistance Now in Play

The S&P Global/CIPS purchasing managers’ indexes (PMIs) were released earlier today, and all three measures came in softer than expected. The composite PMI fell to 47.9 in August, down from 50.8 in July. While manufacturing also came in considerably below market consensus at 42.5 (vs 45.1 expected; 45.3 previous), the blow was seen from the services print, falling into contractionary territory to 48.7 in August (< 50.0), down from 51.5 in July, and experiencing its first contraction in seven months.

This is widely seen as a signal that the work the Bank of England (BoE) has done thus far is beginning to have an effect. Markets pulled back their bets that the BoE will raise rates by 50bps this month; markets are, at the time of the release, fully pricing in a 25bp hike, with a terminal rate just south of 6.0% in the first half of 2024.

The PMI release sent sterling plummeting and lifted the FTSE 100 higher. You may recall a short piece I put out on Tuesday highlighting resistance on the higher timeframes of the GBP/USD, which could weigh on the GBP here https://www.fpmarkets.com/blog/gbp-usd-technical-resistance-to-hold-sterling-lower-ahead-of-uk-pmis/. However, we have yet to reach daily support marked at $1.2584.

The main focus for this piece, nonetheless, is on the FTSE 100, following the release of the PMIs. As you can see from the daily timeframe, price is now retesting the underside of a recently breached trendline support, taken from the low of 4,769. In addition, if you drill down to the H4 timeframe, you will note that the unit has formed an AB=CD bearish pattern on the approach, thus adding weight to bears potentially stepping in here and seeking lower ground.

Daily Chart:

H4 Chart:

Charts: TradingView

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