FTSE 100: Risk Skewed Downward Ahead of BoE
- FTSE 100 technical structure altered after recent sell-off
- Support and resistance levels outlined
- BoE tomorrow, be on high volatility alert regardless of expectations
A week ago when we last examined the FTSE 100 we were noting the bull-flag breakout and possible turn higher from a pullback after the bullish trigger, but that was not to be as the pullback turned into quite a bit more than just that. Downward momentum kicked in on Friday when the US market was hit hard, spilling over into Monday trade.
We had previously been noting the series of higher lows and higher highs in place shortly after the post-Brexit rebound began to unfold, but recently said if the 9/1 pivot at 6722 doesn’t hold then the upward trend would be put in jeopardy of breaking.
So it is, the nice neat upward parallel structure is broken and a lower low is in place, opening the door up for further losses. The next support level comes in by way of the 8/3 pivot at 6611, then beyond there we will need to turn to the 6430/490 zone.
The area around 6735/70ish will be the first spot we look for the market to find difficulties on any advance higher which may unfold; this is the area we will look to as not only a capper but also a spot for shorts to look for entries.
Heads up: Tomorrow, the BoE is due out with a decision on its current monetary policy stance and release of the policy statement. No expectations for any changes to be made, but the statement could hold language which provides the markets with enough guidance one way or another to potentially jostle things up, so as per usual – expect the unexpected and be prepared accordingly.
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinonFX.