In 2024, the FTSE100 Index (LSE: UKX) experienced a slight dip, just surpassing a 50 basis point decline. The first week witnessed UK stocks sliding notably, with the FTSE 100 marking its most substantial drop since November 2023.
The backbone of this downward movement lies in the weakening of resource-linked stocks facing market value losses due to diminished profitability expectations stemming from declining commodity prices. Compounding this pressure is the strengthening British Pound, buoyed by robust economic indicators.
Eyes now pivot to the eagerly awaited US inflation data, poised to influence risk sentiment across markets. The outcome stands to shape the monetary policy direction of the world’s largest economy, consequently impacting global markets.
Technical
The FTSE100 Index has charted an upward trajectory, comfortably positioned above the 100-day moving average and confined within an ascending channel pattern.
Notably, the 7493.59 level emerged as a reliable support, bolstering the index amid a surge in upward momentum. However, encountering a formidable barrier, the 7746.53 resistance level, established in September 2023, posed a robust challenge to further upside progress. The recent test of this level showcased a dominance of supply over demand, prompting a downturn.
The index hangs in a delicate balance, hovering just above the intermediate support at the 50% Fibonacci Retracement level. Should bullish momentum resurge, retesting the 7746.53 level remains a potential scenario. Conversely, if bearish pressures amplify, attention might shift toward the 50% level as a focal point for downside movements.
Summary
The FTSE100 reflects a nuanced landscape, having dipped amid the resilience of the British Pound and the strain on resource-linked stocks from declining commodity prices. This descent, its most substantial since November, confronts a robust barrier at the 7746.53 resistance level. As the index treads delicately above the 50% level, its trajectory hinges on the forthcoming US inflation data and how it shapes global market sentiments.
Sources: Reuters, Dow Jones Newswires, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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