The FTSE broke to a new 2019 high on Monday on the back of fresh falls for the pound amid growing concerns over a no-deal Brexit and expectations for more central bank stimulus ahead of the Fed and Bank of England meetings. Today, though, it has eased back a little along with the wider global markets, with the DAX suffering a big drop.
From a purely technical point of view, the path of least resistance remains to the upside – for now – given the higher highs and higher lows. Indeed, focusing on the moving averages, the 21-day exponential is above the 50-day simple which in turn is above the 200-day average. These averages are currently pointing higher, too, objectively confirming the bullish trend.
So, as we don’t see a major reversal for the wider global stock markets, the index could be heading towards the 2018 high around 7885 in the coming days and weeks. The key levels to watch on the downside are at 7,600 and 7565 – levels which were previously resistance and could turn into support upon retest.
However, if the index goes on to break these levels then we could see a potential correction. The line in the sand is the 7470 level, which is the most recent low. A break below it would create a lower low.
So, to recap, the path of least resistance is still to the upside, but we are prepared for a reversal if certain conditions are met, such as a break below 7470.
The bulls could re-emerge ahead of the BoE and Fed meetings if we see more forecast-beating earnings from UK-listed companies after the likes of Vodafone and BP reported solid results. Lloyds will be among the companies posting their results tomorrow morning.
Source: Trading View and FOREX.com. Please note this product may not be available to trade in all regions.