The FTSE 100 is starting to rally again, as US indices surge after the Federal Reserve meeting and the leading UK index found meaningful technical support from just above the 7,050 level.
Traders bought stocks after the FED sounded more bullish towards the US economy, and largely played down the rising inflationary pressure. The 0.25 basis point increase was a relief to the market.
Many market participants feared that the FED could raise rates very aggressively, by around 0.50 basis. Now UK100 traders turn their attention to the Bank of England.
If the Bank of England raises rates for a third consecutive month to tame inflation, it could weigh on the UK100. With energy prices surging, it’s entirely possible the UK central bank could raise rates.
Sentiment towards the UK100 still looks overly bullish. According to the ActivTrader platform, over 71 percent of traders are bullish towards the UK100. This is still a large one-way trading skew.
Typically, the retail crowd is on the wrong side of the trade more often than not, so the UK100 could have come too far too fast. Investors are faced with a real dilemma in terms of whether buy the UK100 due to the conflict in the Ukraine worsening.
Technical analysis provides a compelling case that a meaningful price floor is in fact in. A strong bounce is currently underway from a massive rising price channel across the higher time frames.
UK100 Short-Term Technical Analysis
The four-hour time frame shows that the UK100 index is advancing back towards its 200-period MA on the four-hour time frame, around the 7,400 level. The metric is very good to define the short-term trend.
Should we see a push above the 7,400 level it is likely will see the FTSE100 testing back towards a formed wedge breakout, around the 7,500-resistance level.
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UK100 Medium-Term Technical Analysis
The daily time frame shows that the FTSE100 has once again bounced from the bottom a rising price channel between the 7,000 and 8,500 price level.
It should be noted that dip-buyers are were stacked around the 7,050 level earlier this week, with the expectation of a major bounce back towards the top of the price channel over the medium-term.
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