Bear Channel Under Threat

On the back of the Bank of England meeting yesterday, the FTSE is attempting to breakout above the 7678.8 level range highs. The meeting saw the BOE holding rates steady, while pushing back against those calling for imminent rate cuts. Instead, the bank warned that the battle against inflation was still not over and, as such, it remains willing to tighten further. Indeed, the meeting was a little more hawkish than many were expecting, reflected in the upside we’ve seen in GBP post-meeting.

Better Risk Appetite on USD Decline

However, the FTSE appears to be taking its cues mainly from the broad pickup in risk appetite we’re seeing. USD weakness post-FOMC has seen stock markets around the globe trading higher. The initial surge in the FTSE, however, has softened for now with the index pulling back below the 7678.8 level, reflecting more idiosyncratic drivers.

Mixed UK PMI Data

The latest round of UK PMIs today saw the manufacturing reading falling further into the red at 46.4 from 47.2. However, the services reading, which is the more important of the two, pushed up to 52.7 from 50.9 prior. This reading likely serves as an endorsement of the BOE’s outlook, causing some hesitation for FTSE bulls. Looking ahead, however, should USD continue lower and risk appetite continue to swell, the index should remain well supported.

Technical Views

(Click on image to enlarge)

FTSE

The rally in the FTSE has seen the index attempting to break out above the bear trend line from YTD highs and above the 7678.8 level. For now, the rally has stalled into this region though, with momentum studies bullish, the focus is on a further push higher and a test of the 7811 level next. 

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