Bottom line: FTSE long term structure continues to remain bearish against 7724 resistance. Bears remain inclined to resume lower towards 4750 lows as the indice holds below 6500 resistance. A break below 5922 would accelerate the drop further.
Fundamental Outlook:
EURUSD exchange rate has dropped from 1.1422 towards 1.1167 in June so far and might continue to feel the pressure over the next month as well. As COVID-19 infections continue to rise in the US and Asia, Global Equity Markets are facing another selloff. The safe haven US Dollar is set to gain against EURO, GBP and AUD if risk aversion continues.
GBPUSD exchange rate trades below the 1.2400 mark as we prepare to publish this article. As Brexit deadline for transition approaches (June 30, 2020), GBPUSD might come under renewed pressure, this week. The exchange rate might continue to drop further and settle below 1.2000 levels in the near term.
FTSE had dropped over -1.5% over the last week, closing around 6157. The indice would be taking cues from Brexit developments along with its peers Dow Jones, SPX500 and DAX over the week. It remains to be seen if UK Prime Minister Boris Johnson would ask for an extension for Brexit transition tomorrow.
Technical Analysis:
FTSE might have carved a meaningful lower high at 6510 early this month, as bears remain poised to resume lower towards 4750 levels. Intraday rallies remain possible and FTSE might re-test 6350/60 levels before giving in to bears again.
FTSE has reversed from just below the fibonacci 0.618 retracement of the drop between 7693 and 4750. Also note that the indice is facing strong resistance around the back side of the past support trend line.
Traders might have initiated fresh short positions around 6400/6500 mark, with protective stop above 6900 levels. The projected targets are pointing below 4750 levels, going forward.
Prepared by
Harsh Japee, Technical Analyst.
FTSE Chart
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