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The FTSE 100 continues to hold firm around the 7,200 and enjoy strong dip-buying, despite other European and global equity markets tumbling over Chinese COVID-19 and growth concerns.
Typically, the leading UK index has a strong correlation with US and European indices, however, the better-than-expected UK data and a rise in mining stocks helped the FTSE100 actually closer higher.
Expectations of a post-lockdown slump in unemployment claimants failed to materialise in the UK job report this week, while UK wages and the official unemployment rate improved.
A sharp decline in the British pound currency also helped boost the FTSE100. Typically, sterling weakness is bullish for the index, while strength is negative, meaning the index and sterling usually have a confirmed inverse relationship.
Traders also shrugged-off the news that BHP Group, a mining giant inside the FTSE100, was set to leave the index after two decades. These ramifications are could yet to be felt, this is a story worth monitoring in future.
Mining stocks one of the largest sectors on the index, and the exit of BHP from the FTSE 100 could be a shift away from the commodity focus, which has been dominant over the years.
Sentiment towards the UK100 is not matching the current bullish bias and how traders appear to be growing in confidence. According to the ActivTrader platform some 53 percent of traders are bullish towards the UK100 right now, while 47 percent of traders are bearish. It is hard to gather much from sentiment at the moment.
UK100 Short-Term Technical Analysis
The four-hour time frame shows that the FTSE100 appears to be forming a complex inverted head and shoulders pattern, which is close to being activated above the 7,240 level.
According to the overall size of the bullish pattern a rally towards 7,600 could be on the horizon if the 7,240 level is overcome. It is also very encouraging the way that any dips towards the 7,000 level are still being bought.
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UK100 Medium-Term Technical Analysis
The daily time frame shows that the UK100 is trading inside a large rising price channel, which continues to expand over time, and indeed point higher.
It is also noteworthy that the FTSE100 looks unlikely to fall towards the bottom of the pattern and looks to be targeting the top of the channel, around the 7,900 level.
Typically these patterns are bearish reversal patterns, so we could see a breakput or reversal if the FTSE100 reaches the top of the pattern.
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