FTSE 100 Rally Blocked by Sterling Strength and Heavyweight Technicals
FTSE 100 Price, Analysis and Chart:
- Sterling (GBP) remains elevated as Brexit talks continue.
- Important FTSE 100 technical resistance needs to be cleared.
The recent push higher in the FTSE has come to a halt despite the markets adopting a risk-on sentiment. Financial markets are continuing to price-in looser monetary policy, adding market liquidity and positive sentiment to an already buoyant equity space. Reports that US – China trade negotiations are moving forward is helping to boost sentiment today, although nothing has been confirmed.
The recent FTSE 100 rally has stalled however, weighed down by a strong British Pound, with the inverse correlation between the two different asset classes holding firm. Sterling is attracting buyers who continue to believe that a No Deal Brexit is being slowly taken off the table and that a solution to the Irish backstop problem will be found before the end of March.
Afterrallying over 700 points from late-December, the FTSE 100 is now finding further upside blocked by two important technical levels. The 50% Fibonacci retracement level and the closely followed 200-day moving average meet around the 7,210 - 7,218 level and while the index has pierced through this area, the FTSE 100 is finding it difficult to break and close decisively above here. In addition, the RSI indicator is just starting to move out of overbought territory, signaling a potential downturn in sentiment. Support is currently pegged around 7,130 and 7,056.
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FTSE 100 Daily Price Chart (May 2018 – February 21, 2019)
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