FTSE 100 has started the day in muted fashion and lower by 0.40%. However, tomorrow’s meeting of central bankers may awaken the Index from its slumber. UK traders will be sitting on their hands today, awaiting FOMC chairman’s Powell’s address tomorrow. And despite expectations of taper talk dramatically decreasing, the symposium should provide clues as to the Fed’s plans.
After climbing above 7,100 in May, the FTSE 100 (INDEXFTSE: UKX) has struggled to make any real progress. Conflicting themes have resulted in an extended period of indecision, and for most of the last three months, the UK’s blue-chip index has gyrated on either side of 7,000.
The boost given by Britains impressive vaccination drive gave way to fears over the delta-variant strain, which sent the FTSE 100 lower to 6,800 in July. Furthermore, the threat of the Fed starting to reduce its asset purchases further compounded these concerns. However, a slew of negative data over the last week has made the outlook less clear.
Poor manufacturing data out of the US and China’s slowing economy have many analysts predicting the US Central bank will sit tight for now. Yesterday Goldman Sachs economists raised the odds that bond purchases will taper off in November. Although until fed Chair Powell speaks, we won’t know which path the Fed will take. However, traders should be prepared for any outcome.
The daily chart shows that the index has been flirting with the 50 and 100-day moving averages over the last few weeks. The 50 DMA at 7,084.5 is the immediate level of support. Although the more significant 100-day at 7,007 sits just above the psychological 7,000. Therefore, this is an area of particular importance. Should the FTSE lose this support, a logical target is the 200-day moving at 6,806.9, which aligns with the lows in May and July.
On the upside, the August high of 7,240 is the first notable resistance. And following that, the bulls will look to the January 2020 peak of 7,692.
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