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The FTSE 100 at Risk of Trading Lower on Soft Commodities

The FTSE 100 at Risk of Trading Lower on Soft Commodities

Alejandro Zambrano, Market Analyst


The FTSE 100 at Risk of Trading Lower on Soft Commodities

The FTSE 100 was not able to muster any major gains following Friday’s U.S. NFP result. The NFP print of 271k vs. the economist consensus of 185k, shows that the U.S. economy is doing far better than was expected.

The primary reason for the FTSE 100 underperforming was the steep decline in the basic materials sector, down by 1.82% on the day and the 2.23% decline in the utilities sector.

These declines are not surprising given the steep declines in world commodities following the U.S. Dollar breaching its 7 month range on NFP Friday. The Bloomberg Commodity index declined below its September low and is now challenging its August lows. We think it is fair to expect the USD to gain further and for commodities to drift lower in the weeks ahead, as the Fed are expected to raise rates. This should keep the FTSE 100 range bound or potentially tip it below 6300 making the very short-term trend bearish and prone to a bigger decline, in case we break 6255.

Sluggish Times To Remain in Place

There are no major market moving events in today’s session and the market FTSE index may remain range bound within the 6255-6487 range, with a breach to the upper limit probably triggering a rally towards the psychological level of 6600, and 6750 in case of an extension. If we breach the lower end of the 6255-6487 range, we may reach a 6100 level, (61.88% correction of 5875-6487 rally).

Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano

--- Written by Alejandro Zambrano, Market Analyst

Alejandro Zambrano, | Twitter: @AlexFX00

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