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FTSE 100 Technical Analysis: Ascending Wedge Nearly Complete

FTSE 100 Technical Analysis: Ascending Wedge Nearly Complete

2016-07-27 08:19:00
Paul Robinson, Strategist
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What’s inside:

  • Trading in the FTSE 100 remains choppy
  • Ascending wedge near triggering
  • FOMC later today, may have an impact on global stock markets

The FTSE 100 has made little head-way in the past two weeks after the monster rebound off the ‘Brexit’ day low. It appeared as though a pullback may develop following the reversal-day back on 7/14 at resistance created in August 2015, but so far following a one-day dip after the reversal event the FTSE has done little but chewed its way sideways.

Despite the FTSE struggling to trudge higher, there has been little reason to short the low volatility grind. It appears to be a combination of typical price action following extremely volatile swings, summer trading, and no significant catalyst to spur market participants.

The hourly chart shows the 100 working its ways towards breaking out of an ascending wedge. The depth of the triangle points to a measured move of ~130 points, which could take the FTSE up to around 6875, and if it were to trigger to the downside, ~6580. The ascending nature of the pattern within an uptrend suggests it should breakout to the upside, but a downside break is always possible, especially given resistance at hand. It is best to wait for these patterns to trigger before making a commitment.

FTSE 100 Technical Analysis: Ascending Wedge Nearly Complete

Resistance levels on a further climb are at last July and June swing highs of 6813 and 6874 (matching ascending wedge MM), respectively. Support comes in around 6610, then just beneath 6500 lies a one-year support zone of about 80 points or so which the market broke through on June 30 when Carney suggested the BoE would provide needed accommodations to the market.

FTSE 100 Technical Analysis: Ascending Wedge Nearly Complete

Later today the FOMC will release its decision on interest rates and monetary policy statement. There are no expectations of the Fed raising rates, so the market will be focused on language changes which may provide indications on the timing of another possible rate hike. Depending on how risk sentiment in the US plays out following the release, global equity markets could find themselves impacted in the next day of trading.

Watch trader positioning in real-time via the ‘Speculative Sentiment Index’.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX.

You can email him directly at instructor@dailyfx.com with any questions or comments.

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

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