UK Equities Bounce Back


The FTSE 100 index (LSE: UKX) kicked off Friday positively, staging a reversal from Thursday’s selloff prompted by higher-than-expected inflation in the US. Precious metals took the lead, mirroring gold’s upward trajectory. The momentum gained further support from an optimistic GDP report, which advocated for expansion in the UK equity market. 

Year-over-year GDP growth landed at a solid 0.2%, aligning seamlessly with the earlier forecast of 0.2%, marking a positive shift from the preceding -0.1%. Simultaneously, month-over-month inflation witnessed a similar expansion, climbing from the previous -0.3% to a noteworthy 0.3%, surpassing the anticipated 0.2%. 

Amid these encouraging developments, Burberry’s shares experienced a notable dip, falling by over 9%. The luxury fashion brand attributed this decline to a slowdown in trading during December, announcing that its full-year earnings would likely fall below the previously guided figures. This unexpected turn potentially acted as a dampener on the overall upside momentum. 


On the 4H chart, a descending channel has emerged as the index pulled back from its peak in the early days of the year. The 25-SMA (green line) is at a point of convergence with the 50-SMA (blue line) and could provide a challenging hurdle for the bulls to cross if they attempt a breakout from the channel. 

Resistance at 7,652.65 currently prevents the index from testing the dynamic channel resistance at the 50-SMA near 7,674.92. If a breakout occurs here, a trend reversal could be catalysed, with resistance at 7,703.49 and 7,725.35 becoming likely destinations. 

However, if resistance at 7,652.65 holds, the prior retracement could continue. Support at 7,609.44 and 7,575.38 could be pivot points for potential rebounds within the channel. Ultimately, the sellers could look to drive the index down to the Fibonacci midpoint and 61.8% golden ratio at 7,521.96 and 7,465.08, respectively.  


After Thursday’s downturn, the FTSE 100 index has recovered swiftly, as the latest GDP figures ignited optimism in the equity market. Resistance at 7,652.65 now stands in the way of further expansion and could be a crucial level to watch as the week draws to a close.  

Sources: Koyfin, Tradingview 

Piece written by Tiaan van Aswegen, Trive Financial Market Analyst 

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