The FTSE100 (LSE: UKX) closed a fourth consecutive week in the green, gaining a mouth-watering 7.52% over the period as markets returned to a risk-on mood.
Key to the FTSE100’s performance this week will be the U.K.’s inflation reading due tomorrow, the Retail sales and PMIs at the end of the week. Economists expect inflation to cool down to 9.8% Year-on-Year, against 10.4% in February. The FTSE100 could move higher on tailwinds of a probable peak in inflation and interest rates while weakening consumer spending could validate the need for a pause.
The FTSE100 shifted into an uptrend following price action breaking out above its descending channel pattern and, subsequently, the 100-day moving average. Support and resistance were established at the 7203.50 and 7947.00 levels, respectively.
Bullish traders had the index’s upper hand, leading the price towards resistance. However, price action is now consolidating sideways in a rectangle pattern near resistance, suggesting that bulls and bears are preparing to reprice and take the index in one direction.
A breakout to either side of the consolidation pattern could validate an extended move in the direction of the breakout. If a breakout above the pattern ensues, bullish traders will likely look to the 7947.00 level with interest. The next probable level of interest for bulls would be the year-to-date highs at 8046.78 if they surpass the 7947.00 level with conviction.
Alternatively, bears will likely look to the dynamic support established by the moving average at the 7790.71 level if price breaks below the consolidation pattern.
According to a Reuters poll of economists, The Bank of England is expected to raise rates by 25 basis points in its fight to tame inflation which has run over and beyond the 2% target. However, BOE officials suggested inflation could be peaking, prompting expectations of a pause. If the FTSE100 extends its uptrend on a more dovish BOE, the 8046.78 level could be attainable for bulls.
Sources: Reuters, TradingView