This week, U.K. shares fell due to inflation statistics that were slightly stronger than anticipated.
Could this portend a collapse of the FTSE 100?
The equities index established lower highs and found support at 7315.00, forming a falling triangle, as can be seen on the 4-hour chart below.
Price is currently testing the pattern's absolute bottom and may soon bounce back to the top.
At least, that's what it seems like technical indicators are telling us.
The UK100 may rise once more to the triangle resistance at 7600.00 because the 100 SMA is above the 200 SMA, indicating that support is more likely to hold than to break.
Additionally, Stochastic is dipping towards the oversold area, a sign that sellers are worn out. Once the oscillator pulls higher, the price might do the same and turn its attention back towards the north.
It would be wise to keep an eye out for the moving averages to act as dynamic resistance in the area of 7500.00 as well.
However, the most recent U.K. CPI statistics indicate that there is a good chance that the BOE will raise interest rates once more, which appears to be keeping markets on edge over a possible recession.
Then, a break below the triangle support may be prompted by fundamental causes, which would be followed by a selloff that is equal in height to the chart formation.
Remember that the U.K. will be releasing its retail sales report on Friday as well, so a negative consumer spending number might add further bearish sentiment to the mix.
