The FTSE 100 has staged a strong rebound back above the 7,000 level this week after last week’s price, with the recovery in the leading United Kingdom index driven by mining and industrial stocks.
A recovery in US stocks is also helping boost the mood of UK stock traders as market participants across the pond brush aside fears about the US Federal Reserve tapering anytime soon.
Earlier this week Federal Reserve Chair Jerome Powell testified before US Congress, where Powell’s prepared remarks largely aligned with the recent June FOMC policy statement.
The market reaction was muted as it appears that the FED still wants to see how the US economy plays out as things start to get back to normal, meaning that tapering is still off the table for now.
FTSE100 traders now look to the Bank of England policy meeting, which is likely to be less hawkish than the FED meeting, given that the UK still has COVID-19 measures in place and the risk of a further lockdown is still looming.
Inflation will be a big focus of today’s meeting as will QE, traders will also be braced for the central banks current thoughts on interest rates, growth, and the effect of COVID-19 on the UK economy.
The UK is in the midst of summer, which is traditionally a good time for UK stocks as retail spending is increased, and on average, people consume and travel more. The euro championship could also be a boon for summer spending in the United Kingdom economy.
Bullish sentiment towards more gains in the UK100 has dropped since last week, meaning that traders are growing less bullish after last week’s wipeout under 6,900. According to the ActivTrader platform some 58 percent of traders are bullish towards the UK100 right now.
UK100 Short-Term Technical Analysis
The four-hour time frame shows that the FTSE100 pulled back sharply after rallying to a new multi-year high. Prior to last week’s pullback, a massive head and shoulders pattern had been invalidated, which really improved the technical backdrop for the FTSE100.
According to the overall size of the invalidated pattern a rally towards 7,500 could be on the horizon if the 7,200 level is overcome. It is very encouraging the way that the dip under 7,000 was bought so rampantly.
UK100 Medium-Term Technical Analysis
The daily time frame show that the UK100 is approaching key falling trendline resistance around the 7,200 level. A breakout above this area could turbo-charge the UK100 higher.
It is also noteworthy that the FTSE100 will likely may an attack towards its all-time, which is around 7,770, if the 7,200 to 7,500 range is broken. Please be aware that a parabolic towards 9,000 could happen if the all-time high is breached.