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Market update: FTSE 100 stumbles to support as UK inflation returns to 40-year high

UK double-digit inflation raises concerns of a deeper recession; FTSE 100 threatens 7,000 as bank stocks take strain and GBP/USD struggles to hold onto recent gains threatening UK stocks.

Source: Bloomberg

FTSE 100 technical analysis

The UK FTSE 100 has failed to hold above technical resistance after another double-digit inflation print raised fears of a deeper recession.

With both political and macroeconomic turmoil weighing on the British pound (GBP), the major stock index has fallen back below prior support turned resistance currently holding at the key psychological level of 7,000.

After a sharp decline from the September high of 7,514, a rebound off 6,707 allowed FTSE to climb higher before reaching the 78.6% Fibonacci retracement of the 2009 – 2018 move holding as additional resistance at around 6,952.

With a narrow zone of confluency forming between 6,850 and 7,000, price action continues to hover around the 200-week MA (moving average) at 6,948 highlighting the importance of this zone.

FTSE 100 weekly chart

Source: TradingView

As prices remain encapsulated between technical support and resistance, the four-day rally has come to a halt. With an influx of sellers and rising recession fears weighing on sentiment, the next big zone of support continues to hold at 6,850 with a break below opening the door for 6,800.

FTSE 100 daily chart

Source: TradingView

FTSE 100 client sentiment

At the time of writing, retail trader data shows that 67.51% of FTSE 100 traders are net-long with the ratio of traders long to short at 2.08 to 1. The number of traders net-long is 1.46% higher than yesterday and 0.30% lower from last week, while the number of traders net-short is 1.56% lower than yesterday and 7.87% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests FTSE 100 prices may continue to fall.

Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger FTSE 100-bearish contrarian trading bias.

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.


The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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