Bottom line: FTSE medium term structure continues to remain bearish against 6500 interim resistance. The indice might produce intraday counter trend rallies and might find resistance around 6100/6200 zone, going forward.
Fundamental Outlook:
EURUSD had rallied through 1.2010 levels before finding selling pressure over the last week. The exchange rate might remain under pressure over the next several weeks as risk aversion might have triggered on Friday. The safe haven US Dollar might be set to gain further.
FTSE had dropped to 5776 last week before closing at 5837, down over -2.47%. Global equity markets closed in the red over the last week with Dow Jones at (-1.82%), SPX500 down (-2.31%) and DAX (-1.46%). Investors might be wary of potential volatility over the next 4-8 weeks.
GBPUSD had dropped through 1.3176 on Friday before finding some support and closed around 1.3276 mark. The exchange rate might witness further volatile price action as it takes its cues from the Brexit deal. Fisheries remain major concern as EU and UK negotiations resume today. Adding further pressure might be the rising unemployment and the requirement of another stimulus as stated by BoE.
Technical Analysis:
FTSE remains in control of bears as it prints 5775 lows on Friday, before pulling back. The indice is trading around 5850 for now and might remain poised to produce a counter trend rally towards 6100 interim resistance zone, in the next few trading sessions.
FTSE had earlier dropped from 7724/7696 levels through 4750 in March 2020. Furthermore, the drop seemed to be an impulse wave which was retraced as prices hit 6500 levels, close to fibonacci 0.618 levels, around 6590 as highlighted on the chart.
Ideally, FTSE should stay below 6500 interim resistance to keep the overall bearish structure intact. Most traders might remain inclined to initiate fresh short positions around 6100/6200 interim resistance with protective stops above 6600 mark and potential target below 4750 respectively.
Prepared by
Harsh Japee, Technical Analyst.
FTSE Chart
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