FTSE 100 Bounced From a Major Support Level
- The FTSE 100 bounced back from a key support level, the rise occurring on a soft U.S. labor market report.
- Price ended its immediate bearish trend as it breached Thursday’s high; a higher low is missing for the FTSE 100 to complete a bullish pattern.
- The intraday high of 6210, formed in the afternoon of May 3 is the next short-term resistance level, while the first support level is last week’s low of 6054, followed by the March 10 low of 6006.
The FTSE 100 managed to end Friday on a bullish note from being sold earlier in the session and price briefly slipped below the April monthly low of 6060. Price sliding below such an important level as the 6060 low, which is the last swing low of the bullish trend in place since February, would have usually triggered further losses in the short-term and longer-term. However, the FTSE 100 rallied from its lows and closed higher, in line with other equity indices as the DAX 30 and S&P 500.
The rise in the index was strong enough for it to breach the prior day’s high, the April 5 high of 6154, and the FTSE 100 did thereby stop creating lower highs, a trend that has been in place since April 21 and the 6431 high.
As the price has stopped creating lower highs, the trend is no longer as bearish as it was before, but the trend is nevertheless bearish given that price has only created a higher high and not yet, a higher low above last week’s low of 6054. To create a complete and full bullish pattern of higher lows and higher highs, a higher low above 6054 is needed.
Traders may also be cautious in regards to the reason as to why the FTSE 100 and other global stock markets rose. The trigger was the U.S. labor report, which showed the U.S. economy added 160k new jobs, a lower figure than the 200k expected as per a Bloomberg News poll. The unemployment rate remained unchanged while average hourly earnings rose by 2.5% YoY vs. the 2.4% expected and a 2.3% prior print. It may have been the higher wage growth, which encouraged traders to turn bullish as it may translate into higher consumption but it is hard to know exactly what motivated the markets to rise.
In the short-term, the resistance levels above the April 5 high of 6154 are the intraday high of 6210, formed in the afternoon of May 3 and the April 27 high of 6341. While the first support level is last week’s low of 6054, followed by the March 10 low of 6006 and the February 24 low of 5841.
FTSE 100 | CFD: UK100
Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano
--- Written by Alejandro Zambrano, Market Analyst for DailyFX.com
Contact and follow Alejandro on Twitter: @AlexFX00