FTSE 100 Forecast as the Footsie Recovery Hits Resistance

Summary:
• The FTSE 100 index has held steady in the past few weeks even as risks to the UK economy remain. It has found resistance at 7,430

The FTSE 100 index has held steady in the past few weeks even as risks to the UK economy remain. The blue-chip UK stocks index was trading at £7,427 on Tuesday, which was its highest level since November 11. It has climbed by more than 10% from its lowest level in October. The FTSE 250 and FTSE 350 indices have also done well.

UK economic risks

The FSE 100 index has been in a strong bullish trend in the past few weeks despite risks to the UK. In his autumn statement last week, Jeremy Hunt, the country’s chancellor, said that the country was already in a recession. He expects that the downturn will lower the standard of life and erase most of the growth that happened in that period. Further, the UK economy will remain in a downturn for the most part of next year.

The UK economy is battling multiple battles, including soaring inflation, high-interest rates, and the complexities of Brexit. As a result, home prices are crashing while retail sales have started sinking. The British pound is a few points above its lowest level in more than 30 years. At the same time, the Bank of England has been hiking interest rates while the government hiked taxes.

The FTSE 100 index has rallied because of its correlation with other global indices like the Dow Jones, Hang Seng, and DAX index. It has also jumped because many companies in the index have a presence in other countries. For example, firms like Shell, BP, and Ashtead do a lot of business in the US. 

The best-performing FTSE constituent in the past 30 days has been Centrica whose shares has risen by 40%. Ocado share price has rallied by over 32% after it inked a deal with Lotte Shopping. It has erased most of its recent gains. Other top FTSE 100 holdings that performed well are Rightmove, Schroders, and Land Securities. On the other hand, the top laggards in the index are BAE Systems, Shell, BP, and Whitbread.

FTSE 100 forecast

The 4H chart shows that the Footsie index has been in a strong bullish trend recently. This rally saw it find substantial resistance at £7,434, where it has failed to move above in the past few weeks. It remains above all moving averages and is at the middle of the ascending channel shown in purple. The Relative Strength Index (RSI) has moved above the neutral level.

Therefore, more gains for the index will be confirmed when the FTSE 100 index moves above the key resistance at £7,435. A drop below the support at £7,400 will invalidate the bullish view.