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FTSE 100 Rises on GBP/USD, GBP/EUR Correction: Crucial Resistance Ahead

FTSE 100 Rises on GBP/USD, GBP/EUR Correction: Crucial Resistance Ahead

Justin McQueen, Analyst

FTSE 100 Price Analysis & News

  • FTSE 100 a Key Beneficiary from GBP Selling
  • Key Resistance Ahead at Psychological 7000 Level
  • FTSE 100 Stocks Above 200DMA at Historical High

The FTSE 100 has hit a fresh post-pandemic high having taken out the January peak. While improving economic data has underpinned the global equities, notable strength in the FTSE 100 has been in part due to the corrective move lower in the Pound. Keep in mind, that the index is largely compiled of multinational corporates where2/3 of the revenue generated among FTSE 100 companies are from overseas, thus the value of repatriated profits are higher as the Pound falls. Therefore, should GBP begin to stabilise and recoup its recent losses in a sharp manner, this could prompt the index to lag its counterparts.

Going forward, I remain optimistic on the FTSE 100 with the index somewhat comparatively better valued than other indices given that the index has yet to fully recoup its pandemic losses. That being said, there are a few points to make, the FTSE 100 is within close proximity to the rising trendline from the GFC low, which has previously held firm. Therefore, given that the trendline also coincides with the psychological 7000 level this will be a tough area to crack.

FTSE 100 Chart: Daily Time Frame

FTSE 100 Rises on GBP/USD, GBP/EUR Correction: Crucial Resistance Ahead

FTSE 100 Chart: Monthly Time Frame

FTSE 100 Rises on GBP/USD, GBP/EUR Correction: Crucial Resistance Ahead

Source: Refinitiv

To add to this, taking a more granular look at the index, 84% of stocks are trading above its 200DMA and while this is below the 92% in January, it is historically high, in which 80% has usually been the level hit before a pullback in the FTSE 100.

FTSE 100 Rises on GBP/USD, GBP/EUR Correction: Crucial Resistance Ahead

IG Client Sentiment: FTSE 100 Retail Positioning

Retail trader data shows 52.63% of traders are net-long with the ratio of traders long to short at 1.11 to 1. The number of traders net-long is 9.31% lower than yesterday and 36.05% lower from last week, while the number of traders net-short is 29.07% higher than yesterday and 77.88% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests FTSE 100 prices may continue to fall.

Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current FTSE 100 price trend may soon reverse higher despite the fact traders remain net-long.

FTSE 100 Rises on GBP/USD, GBP/EUR Correction: Crucial Resistance Ahead

Source: IG, DFX

The top differences & trading tips for the FTSE 100 vs FTSE 250

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