FTSE 100: Hammering off the Highs to Continue
- FTSE declines off confluence of top-side trend-lines
- Sterling rallies massively on May’s ‘Brexit’ speech
- Old record highs eyed as near-term target
On Tuesday, when we last looked at the FTSE 100, the index was beginning to decline off a confluence of top-side trend-lines; one extends over peaks in 2013 and ‘15, and the other over the highs of October of 2015 and ’16. The UK Prime Minister Theresa May gave a ‘Brexit’ speech on Tuesday which sparked a massive rally in Sterling (GBPUSD rose ~300 points) and sent the FTSE reeling. Trump weak dollar comments added fuel.
Sterling weakness has helped translate into gains for the FTSE 100 in recent months due to the index make-up being dominated by multi-national companies whose profits are mostly earned outside of the UK, and when repatriated equates to higher earnings.
At any rate, the FTSE took it on the chin just a couple of days after recording its 12th record close in record territory – it was due. It was a damaging decline in the short-run at the least, wiping out several days of gains in one fell swoop.
We look for the index to continue to drop, with eyes set on the old record highs – 7104 on a closing basis, 7130 intra-day. It’s not a stretch to look for the market to get to those levels in the next few days or less. From there, assuming we get a retest, we will take interest in how the prior highs are handled; will the market quickly find buyers, or melt on through? We’ll address the situation when it’s time...
FTSE 100: Daily
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---Written by Paul Robinson, Market Analyst
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.