FTSE trying to break key resistance as elections near
Fawad Razaqzada November 27, 2019 12:06 PM
The index has been trying to carve out a bottom and today it was peeking above old highs in the 7420-7433 range.
As my colleague Fiona Cincotta reported earlier, European markets extended their gains this morning amid the lack of any fresh news with investors continuing to fade the dips due to ongoing optimism over a US-China Phase One trade deal. In the UK, traders are also watching polling data closely ahead of the December 12 general election. So far, we haven’t seen any major swings in the polls to impact the pound or the FTSE in a meaningful way, with the business-friendly Tories still remaining the firm favourites to win the majority.
If the polls are correct and the Conservatives do end up winning the majority of the votes, then the UK will almost certainly leave the EU on January 31 after two extensions and three and a half years since the referendum which divided the nation. The UK will then enter a transition period and trade negotiations will commence. At last, there will be some certainty in so far as Brexit is concerned.
Meanwhile, in the event of an election shock, it will most likely be the pound rather than the internationally-focused FTSE that may show a negative reaction. In fact, a drop in the pound may even support the index as we have seen so many times in the past.
So, the outlook on the FTSE appears somewhat positive in the short-term. However, with the US stock markets rallying to severally overbought levels, there is a growing risk we may see a sharp sell-off in one of these days on Wall Street. If that happens, then global equities may fall as well, which could put downward pressure on the FTSE as well. So, we are just cautiously bullish on the FTSE at this stage.
Source: eSignal and FOREX.com. Please note this product may not be available to trade in all regions.
Technically, the price action on the FTSE has been more range-bound that its European peers, and nothing like the US indices, possibly reflecting the uncertain political situation domestically. However, it has been trying to carve out a bottom and today it was peeking above old highs in the 7420-7433 range. Thus it may be on the verge of a breakout from the range it has been stuck inside since early August. A clean break above this 7420-7433 range is what the bulls are looking for now. If seen, future dips back into this region could be defended, potentially leading to further gains. A potentially stronger support level comes in just ahead of the 200-day average (7315) around 7335. Meanwhile, a couple of potential resistance levels or bullish objectives to watch out for include 7463 and 7536, levels which were formerly resistance.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.