FTSE Technical Outlook Following Brexit ‘Agreement’; GBP Correlation a Factor Again
FTSE Technical Highlights:
- EU and UK agree on 6-month flexible extension
- Pulling back from t-line off record high
- FTSE/GBP correlation strengthening again
For the recently released Q2 FTSE & GBP Forecasts, check out the DailyFX Trading Guides page.
FTSE pulling back from trend-line
The FTSE saw very little impact on the EU/UK 6-month Brexit agreement, as was also the case with the Pound, which brings into play a currency/stock index relationship worth watching again. The one-month correlation between the FTSE/GBP is -0.60, after trading in positive territory briefly during late-March into this month.
It’s a statistically significant correlation and with GBPUSD coiling up and ready for a breakout from a wedge formation, it could act as a boon (drop in GBP) or anchor (rise in GBP).Even if not using so much as a guide for the FTSE, it’s worth noting from a risk management perspective when holding positions in both the UK index and GBP-pairs at the same time.
GBPUSD Daily Chart (wedge nearing breakout)
Looking at the Footsie from its own technical standpoint, it is coming off a significant trend-line running down from the record high. This will remain a hurdle for the market as long as a close doesn’t develop above 7477.
The price action for the FTSE has been 3 steps forward, 2 steps back. With resistance and this tendency, a pullback is seen as likely to continue developing. It could very well be a pullback to buy at some point if done in constructive fashion, but for now caution is warranted for longs until 7477 is broken.
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FTSE Daily Chart (t-line resistance)
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.