Bottom line: FTSE long term structure remains bearish against 7724 resistance. Over the short term though, bears have managed to carve a lower high around 6350 levels which might keep intraday rallies in check. Bears might continue to remain in control until 6500 is intact.
Fundamental Outlook:
EURUSD had dropped by -1.77% over the last week closing around 1.1630 mark. The exchange rate has been under pressure since September 01, 2020. As risk assets declined, the safe haven US Dollar has managed to gin across major currencies. The exchange rate might remain under pressure with US Presidential debate, NFP event risks lined up this week.
FTSE had declined by -1.94% over the last week, as risk aversion continued. Dow Jones and SPX500 dropped around -2.0% and 0.97% respectively and US Dollar Index rose by +1.7% in the last week. Investor sentiment remains fragile over the additions US stimulus package and risk assets might continue its selloff over the next several weeks.
GBPUSD remained under pressure over the last week and managed to close at 1.2745, down -1.31%. The exchange rate might continue to be driven by Brexit developments as October 15, 2020 deadline approaches. An agreement must be reached by the above date to ensure smooth transition by December 31, 2020.
Technical Analysis:
FTSE continued to remain in control of bears as it dropped through 5775 lows over the last week. The indice has managed to pullback since then, and is trading close to 5920 levels as we prepare to publish. Short term rallies might be underway but is expected to be well capped below 6350 and 6500 mark.
FTSE has continued to drop from sub 7700 highs through 4750 lows in Marsh 2020. The entire drop was an impulse wave, which has been retraced by a corrective rally between 4750 and 6500 respectively. Since then, bears have managed to take control back and dropped through 5775 mark.
Also note that FTSE has reversed from just below the fibonacci 0.618 retracement of the impulse drop, which is seen around 6590 levels. It seems to be unlikely at the moment but a push through 6590 would face strong resistance going forward.
Most traders might be willing to hold short positions initiated around 6400/50 levels and look to add further around 6100/50 level. Protective stops might be place above 6500 resistance and projected targets below 4700 respectively.
Prepared by
Harsh Japee, Technical Analyst.
FTSE Chart
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