The FTSE100 (LSE: UKX) has staged an impressive recovery, ascending from the depths witnessed in October, poised for a remarkable third consecutive week of gains. Notably, the recent resurgence was fuelled by a surge in mining stocks amidst the Pound’s decline, prompted by a revealing slowdown in U.K. wage growth.
Amidst this economic shift, the U.K. employment report divulged a deceleration in annual average total pay, including bonuses, between August and October, tapering from 7.9% to 7.2%. This marked the most substantial slowdown in British wage growth in nearly two years, resonating in the Pound’s fluctuation and stirring anticipation of a potential monetary policy easing by the Bank of England in the upcoming year.
The FTSE100’s resilience extends beyond the localized wage concerns, benefiting from the prevailing market sentiment that favours higher-risk assets. Moreover, the U.S., the world’s largest economy, experienced a labour market slowdown, hinting at an imminent conclusion to the ongoing monetary tightening cycle, a factor amplifying market speculation.
All eyes eagerly await the U.S. Consumer Price Index (CPI) report, alongside pivotal policy decisions from the Federal Reserve, European Central Bank, and the Bank of England. These impending economic indicators and central bank actions are poised to steer the FTSE100’s trajectory.
Technical
The FTSE100 showcased a resilient rebound following its October dip, staging an impressive recovery. The dip stemmed from encountering resistance at the 7687.91 level, triggering a temporary downturn. However, a significant support level emerged at 7279.86 after a robust bounce back, fuelled by oversold conditions according to the Relative Strength Index.
Subsequently, the index embarked on a retracement journey, crossing above both the 100-day moving average and the critical 61.80% Fibonacci Retracement Golden Ratio. This surge signalled a shift in market sentiment, with bullish momentum spearheading the index’s ascent. Should this upward momentum endure, the 7687.91 resistance level could become a potential target for a retest.
However, caution might be warranted as the Relative Strength Index indicates overbought conditions, potentially foreshadowing a market reversal. The 50% retracement level could pivot into focus as a potential downside marker in such a scenario.
Summary
The FTSE100’s resurgence, powered by the wage growth slowdown and global market sentiments, showcases its resilience amid economic shifts. Anticipation of central bank actions and key economic indicators looms large, steering the trajectory. Yet, caution prevails amidst overbought signals, hinting at potential market reversals, warranting vigilant monitoring of pivotal support and resistance levels.
Sources: U.K. Office for National Statistics, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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