The FTSE100 Index (LSE: UKX) is navigating a positive trajectory, trading over 2% higher this week and poised for its first weekly gain after enduring three consecutive weeks of losses.
Driving this optimism is a surge in Britain’s consumer confidence, climbing from -22 to -19 in January, the highest level since January 2022. This uptick reflects a growing positive sentiment among the populace.
Furthermore, the services and manufacturing sectors contribute significantly to the index’s upward momentum, with preliminary PMI figures for January surpassing expectations—53.8 for services and 47.8 for manufacturing. These readings signal an improving state of the British economy. As the week comes to a close, market attention turns to the U.S. and the release of the PCE Price Index, the Federal Reserve’s preferred inflation gauge, which could potentially sway market risk sentiment.
Following an upward trajectory, the FTSE100 index witnessed a notable reversal, signalling a shift in sentiment favouring the downside.
The confirmation of this shift came with a breakdown below both an ascending channel and the 100-day moving average, pointing to a potential downtrend. The descent initiated from the 7762.88 resistance level, characterised by overbought RSI conditions.
In contrast, the 7387.09 level emerges as a significant support point, established during an upswing aligned with the lower boundary of the ascending channel. This level becomes a focal point to the downside, potentially subject to retesting if bearish pressures prevail. On the flip side, the 7762.88 resistance level stands as a potential upside target, contingent on the sustainability of bullish momentum above the 50% level.
The FTSE100 charts a path to recovery, celebrating a nearly 1% gain this week, ending a three-week losing streak. Britain’s improved consumer confidence and robust services and manufacturing sectors contribute to this positive sentiment. However, technical analysis hints at challenges, with a notable shift in sentiment signalling potential downsides. The pivotal 7387.09 support level could be a firm boundary to downside pressures in the coming sessions.
Sources: S&P Global, GfK Group, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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