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FTSE 100 Forecast: Have Recent Losses Upended the Bullish Outlook?

FTSE 100 Forecast: Have Recent Losses Upended the Bullish Outlook?

Peter Hanks, Strategist

FTSE 100 Price Outlook:

  • The FTSE 100 surged from November to early January before suffering a setback in recent weeks
  • Market sentiment remains fragile and the FTSE 100 may seek further support
  • That said, recent declines might serve as healthy consolidation and support could act as potential entry points for renewed bullish exposure

FTSE 100 Forecast: Have Recent Losses Upended the Bullish Outlook?

The FTSE 100 suffered due to Brexit uncertainty for months, but rallied around an agreement as it looked to make up lost ground. Enjoying gains from November to early January, the index climbed from the 5,500 area to nearly 7,000 in less than 10 weeks. Now, a recent pullback due to damaged sentiment elsewhere has seen the index fall beneath various levels of support which threatens to upend the rally altogether.

FTSE 100 Price Chart: Daily Time Frame (January 2020 – February 2021)

ftse 100 daily price chart

How to Trade FTSE 100

That being said, little has changed on the fundamental front for the FTSE 100 and it might continue higher if sentiment is healed in the days ahead. Still, the technical landscape took an undeniable turn for the worse and the index will need to avoid posting a series of lower lows before a sustained downtrend is established.

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To that end, the recent swing low around 6,310 might serve as a bellwether for future price action. If broken, the level could open the door to further losses and see the FTSE 100 take aim at subsequent support just north of 6,200.

FTSE 100 Price Chart: 4 – Hour Time Frame (July 2020 – February 2021)

ftse 4-hour price chart

What is FTSE 100? History, Companies & Price Movements

Should the recovery in risk appetite continue, the FTSE 100 might encounter a flurry of overhead resistance. Initial barriers likely reside along the Fibonacci level situated at 6,570, followed by the descending trendline projection from the January high. If bulls were to make a concerted effort and reclaim both levels, the FTSE 100 might enjoy an improved technical landscape going forward.

Areas of subsequent resistance might then appear at 6,700 and 6,855, succeeded by the psychological 7,000 mark that likely played a role in the reversal in early January. As the FTSE 100 looks to regain its footing and continue higher, the upper barrier near the 7,000 zone will serve as a key technical landmark and, should it fail to stall price again, could serve as the starting point for a break out rally.

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Either way, recent declines will have to be arrested before they can be viewed as mere consolidation and not the advent of a longer-term downtrend. Avoiding a series of lower-highs and lower-lows is crucial at this point. In the meantime, 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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