FTSE 100 Analysis and Talking Points
- FTSE 100 breaks lower as commodities slide
- Lower Yuan to weigh on FTSE 100
Risk sentiment continues to sour with the FTSE 100 also under pressure as the index breaks below 7300. I mentioned previously that around the recent range top (7600-50) had been a good area to look for a pullback in the index, particularly as China slowdown risks had been picking up. This had also been reflected in the move higher in USD/CNH, which is now firmly above the 2022 highs despite Beijing’s attempt to pushback back against Yuan weakness. As such, with the FTSE 100 more exposed to China relative to its counterparts given commodity-intensive companies within the index, further softness in the Yuan will continue to weigh on the FTSE.
On the technical front, near-term support is situated at 7220 with a closing break below opening up the doors towards 7000. Meanwhile, on the topside, resistance is situated at 7400 (200DMA)
FTSE 100 Chart: Daily Time Frame
Source: Refinitiv
IG Client Sentiment Warns of FTSE 100 Drop
Data shows 35.25% of traders are net-long with the ratio of traders short to long at 1.84 to 1. The number of traders net-long is 15.95% higher than yesterday and 50.75% higher from last week, while the number of traders net-short is 4.55% higher than yesterday and 16.72% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests FTSE 100 prices may continue to rise.
Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current FTSE 100 price trend may soon reverse lower despite the fact traders remain net-short.
Source: IG
