The exuberant rise in the FTSE in early-year trading and on the back of Thursday's ECB vote could quickly fall back unless the key resistance level of 6,100 is met by the end of the week, says IG's Brenda Kelly.

SHOWS:

LONDON, ENGLAND, UNITED KINGDOM (JANUARY 11, 2013) (REUTERS - ACCESS ALL)

1. IG MARKET ANALYST, BRENDA KELLY, SAYING:

'
(QUESTION: On the inflation target, how are they going to get to 1%, let alone 2%, do you think?)
Well, it's going to be an uphill battle, that's for certain. It does seem to me that a lot of the actual Yen weakness at the moment has been down to the rhetoric coming out of Japan rather than any real sort of actions at the moment. And of course you saw their deficit slipped back in November and of course their current account also slipping below the line as well, so that's adding to the Yen weakness. You're also getting the scenario where there's a little bit of a risk-off, risk-on sort of situation in the markets, so that is feeding into the weaker Dollar. So, in some ways, the US policy is helping the Japanese Yen to a certain degree. But getting to a 2% inflation target is going to be a difficult and a longer term rather than a one-year sort of a scenario given that it's a lagging indicator and given that we're in a little bit of a problem in terms of like global economics to get to that particular level. But I do think it's possible to get to at least 1% given that there's a certain better interest in the Japanese stock market at the moment.
(QUESTION: Alright. Let's get over to Euro, Italian debt auction today, don't seem to be great concerns here. Will we see the yield on three-year paper dip below 2%, do you think?)
I think it's quite possible. Italy had a bit of a shocker there last time around in terms of political arena. And I think for the time being, it's a pretty good bet given that it's above, they're 2.2% above their French equivalent bond. So I think we'll see a nice yield on that today, a good bit of interest too. The main thing that's problematic for Italy is the election coming, going forward. It does look like that it will go ahead and will be still kind of Monti sort of reforms going into place. But there's still that sort of uncertainty that Berlusconi could pip the pace in the polls.
(QUESTION: Alright. And I just want to finish up with this sort of classic at the beginning of the year optimism we're seeing. Equity markets in particular, will we get to 6,100 on the FTSE? Is the optimism overdone?)
I think the optimism is exceptionally exuberant at the moment and it comes in the back as well of the unanimous vote in the ECB yesterday on the rate there. We saw a similar sort of unanimous vote in July 2011 just before the crash, so this exuberance we're seeing. We're also seeing the AAII at high levels and of course that 6,100 has been such a resistance level. I'd like to see a weekly close above that, preferably above the 6,120. Otherwise, I think we're in for quite a significant reversal given the move upwards we've seen in recent days.'