Bottom line: FTSE long term structure continues to remain bearish against 7724 resistance. The indice remains in control of bears as long as prices stay below 6500/6600 mark as well. Watch out for a break below 5750 for acceleration towards 5500 and 4750 over the next few weeks.
Fundamental Outlook:
EURUSD had slipped to 1.1750/54 lows before finding support. The exchange rate has managed to hit 1.1915 highs over the last week after ECB kept interest rates unchanged. Further, the Euro Zone Q2 GDP clocked in marginally better than expected at -11.8%. The exchange rate might remain under pressure if US-China tensions triggers another round of selloff in stocks.
GBPUSD has dropped over 720 pips since September 01, 2020 printing 1.2763 lows on Friday. The exchange rate collapsed on Brexit woes and could remain under pressure, going further. Watch out for the Employment numbers coming out tomorrow, unemployment rate might have marginally increased in July (4.1% Vs 3.9%).
FTSE had managed to rally over the last week by +3.25%, closing in at 6027. Futures are up today and trade above 6050 as we prepare to publish. Global Indices remain vulnerable over rising US-China trade wars; TikTok sale and other tech companies might trigger another round of risk aversion. The race for US Presidency might be another event risk over the next few weeks.
Technical Analysis:
FTSE has pulled back through 6050 levels after printing lows around 5770 recently. The indice might be facing resistance around current levels, followed by 6250 and 6500 mark respectively. Bears might be inclined to take control from here and push lower towards 4750 over the next few weeks.
FTSE had reversed sharply after printing highs around 7696 on January 20, 2020. The indice had dropped to 4750 lows in March 2020 before pulling back. Please note that the above drop was an impulse wave, which followed by a corrective wave towards 6500 mark.
The fibonacci 0.618 of above drop is seen towards 6590 mark. The corrective rally fell short and reversed from 6520 levels, which is still holding well. Any intraday pullback rallies might find resistance around 6050/6100 mark as bears prepare to resume lower.
Most traders might be preparing to initiate fresh short positions around 6050/6100 levels with protective stops above 6600 mark and projected target below 4750 levels respectively. A sustained break above 6500/6600 might change the proposed bearish structure.
Prepared by
Harsh Japee, Technical Analyst.
FTSE Chart
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