FTSE 100 Index Fondles With 200 MA In A Volatile Week

Summary:
• The FTSE 100 Index is gaining momentum after a critical breakout. Bulls are targeting 7,686 points but they still need to break above 200 MA.

The FTSE 100 index rose to fresh 2-month highs on Tuesday. The index tracking the 100 most valuable UK stocks surged to 7,607 points before settling around 7,556 level till press time. Nevertheless, the index remained 0.18% up from its previous session.

The US CPI data for November was released today. They showed that the rate of increase of inflation remained at 3.1% in the last month. While the YoY figure aligned with the market expectations, the MoM figure came slightly higher at 0.1%.

It is worth mentioning here that the FTSE 100 index once again failed to break above its 200-daily moving average, which lies around 7,570 points. A breakout above this moving average could send the index toward its next resistance level of 7,686 points. However, a lot depends on the upcoming decision on rate hikes by the Bank of England.

The US Federal Reserve and the European Central Bank (ECB) will also be having their respective meetings on the monetary policies. This may increase the volatility in the UK equities for the rest of this week.

The following chart shows the technical analysis performed on the daily chart of the FTSE 100 index. Despite a significant recovery from its October lows, the index remains 6% below its yearly highs.

The recent breakout from the downward trendline is finally gaining momentum, which shows an increasing strength in the UK stock markets. However, it has yet to reclaim the 200 MA, which often acts as a major line in the sand.

A clear break above 7,686 points level will make the FTSE forecast very bullish, but for this to happen, the Bank of England has to take a more dovish approach. Analysts are expecting the interest rates in the UK to stay high longer than in the US as the UK inflation remains at 4.6%.