FTSE 100 Forecast for the Week

FTSE 100 Analysis and News

• FTSE 100 Testing 7300 Amid Greenlight for BoE Dec Hike
• IG Sentiment Changes Signal FTSE 100 to Reverse Lower

FTSE 100: Modest underperformance in the FTSE 100 following the latest UK inflation data and given yesterday’s labour market report, which provided initial details of the furlough expiration impact. This provides the green light for a BoE rate rise of 15bps next month. However, there remains a risk of a hawkish disappointment amid the aggressive tightening cycle priced in for 2022 and thus leaves UK Banking stocks at risk of a pullback. Elsewhere, softer oil prices have also played their part in weighing on the FTSE 100, which now tests psychological support at 7300, with the 20DMA slightly below at 7282. Should the index close below ST moving average, risks are for an extended move towards 7200. That being said, the path of least resistance remains higher, with another test of the trendline stemming from the all-time high.

FTSE 100 Chart: Daily Time Frame

Source: Refinitiv

IG Client Sentiment: FTSE 100 May Soon Reverse Lower

Data shows 47.39% of traders are net-long with the ratio of traders short to long at 1.11 to 1. The number of traders net-long is 18.77% higher than yesterday and 11.21% higher from last week, while the number of traders net-short is 12.42% lower than yesterday and 6.36% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests FTSE 100 prices may continue to rise.

Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current FTSE 100 price trend may soon reverse lower despite the fact traders