UK 100 hangs near all-time high

The UK 100 stock index (cash) has fully recovered the pandemic’s loss but with a long delay compared to other major European and US indices, peaking at a new record high of 7,912 last Friday despite the UK’s fragile economic outlook.

The index has been struggling to gain fresh momentum so far this week, but its resilience above its 20-day simple moving average (SMA), which has been supporting the market since the end of January, is strengthening the case for another bull run. The RSI and the stochastic oscillators, although close to their overbought levels, are showing intention to move higher, backing this narrative as well. Yet, with the MACD remaining below its red signal line despite its latest soft upturn, some caution is required.

If the price keeps its foothold around the nearby support area of 7,840, the uptrend may advance into uncharted territory, likely marking a new all-time high around 7,980 – being the 161.8% Fibonacci extension of the latest bearish wave. The 8,000 psychological mark could be the next target, while higher, the door may open for the 8,100-8.150 region.

In the event the bears press the index beneath the 20-day SMA at 7,800, selling forces may intensify towards the 7,710 support zone. This is approximately where the price peaked in 2019, while the ascending trendline from October’s low of 6,704 is also in the neighborhood, adding more credence to the area. A cross below that threshold and an extension beneath the 50-day SMA at 7,630 would downgrade the broad outlook to neutral, sending the price to 7,560.

Summing up, the UK 100 index could build its uptrend in the coming sessions, though with the price trading near overbought levels,the room for additional gainscould be limited.

About the author

Christina Parthenidou

Christina joined the XM investment research department in May 2017. She holds a master degree in Economics and Business from the Erasmus University Rotterdam with a specialization in International economics. Previously, she earned a bachelor of science in Economics from the University of Cyprus. Apart from foreign exchange markets, her research interests include the impact of International trade on labour markets and product development.