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FTSE 100 Forecast: Can the Bullish Break Out Continue Post-Brexit?

FTSE 100 Forecast: Can the Bullish Break Out Continue Post-Brexit?

Peter Hanks, Strategist

FTSE 100 Price Outlook:

  • The FTSE 100 surged to test resistance around the 6,860 level
  • Subsequent resistance may reside at the 7,000 mark
  • That said, the FTSE 100 could fall prey to a case of the “buy the rumor, sell the news” effect
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FTSE 100 Forecast: Can the Bullish Break Out Continue Post-Brexit?

The FTSE 100 suffered due to Brexit uncertainty for months, but a recent deal may have opened the door to a longer-term recovery. The index has surged nearly 400 points (+5.4%) this week alone, suggesting there is still significant demand for the index even after the agreement was struck in late December. Can the FTSE 100 push higher still or will bullish sentiment recede?

FTSE 100 Price Chart: Daily Time Frame (August 2019 – January 2021)

FTSE 100 price chart daily

How to Trade FTSE 100

Before considering sentiment, it is important to note the technical landscape. The FTSE 100 is currently bolstered by nearby support and a recent golden cross formation, which typically signals a period of rising prices. Apart from the golden cross, the 200-day moving average and the 50DMA themselves may provide consistent support in the days ahead and it could help carry the FTSE 100 higher.

FTSE 100 Price Chart: 4 – Hour Time Frame (June 2020 – January 2021)

FTSE price chart

What is FTSE 100? History, Companies & Price Movements

On the other hand, resistance is rather sparse. Recent price action reveals the Fibonacci level near 6,860 possesses some influence but proximity to price may leave it vulnerable. Secondary and tertiary resistance may reside at the 7,000 and 7,200 levels respectively. Evidently, the path of least resistance seems higher at this stage and sentiment remains optimistic.

That said, market sentiment is a fickle thing so bearish reversals remain a possibility and consolidation could prove healthy for a longer-term continuation higher. In the meantime, however, IG client sentiment data reveals retail traders suspect the rally has reached its end as a majority are net-short. Since we typically take a contrarian view to crowd sentiment, this may suggest the FTSE 100 will continue higher in the weeks ahead. Follow @PeterHanksFX on Twitter for updates and analysis.

--Written by Peter Hanks, Strategist for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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