FTSE Technical Highlights:
- FTSE up against trend-line off record high
- Risk is for a move lower from here
- Keep an eye on GBP triangle, it may matter
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FTSE up against trend-line off record high
The FTSE is basically where it was a week ago when I did the last technical update, which means it is still up against the trend-line off the record high. This leaves the index still vulnerable to weakness in the days ahead.
Not only is the market up against trend resistance but it is also in a relatively extended state. After meaningful swings the FTSE in is known in particular for its overlap in price action, or deep retracements, even if the trend is to continue on…
A pullback to the lower slope off the December low could make for a good test of the trend since then. If the FTSE is indeed strong, though, it might not decline back to that point, something to pay attention to. A continued consolidation around trend resistance would be signaling a likelihood that it will break higher. For now, giving shorts the benefit of the doubt below the weekly high of 7476.
FTSE Daily Chart (t-line resistance)
We discussed a bit last week GBP’s once again impact on the FTSE, as the negative correlation on a monthly basis sits right near -0.70, a statistically significant relationship. GBPUSD is nearing the breakout point of a wedge, and with that might come a strong move that either helps (GBP lower) or hurts (GBP higher) the FTSE. Perhaps the relationship breaks down as correlations are known to do, but it’s worth watching, even if it is just from a total risk perspective if holding positions in both the FTSE and GBP.
GBPUSD Daily Chart (watch for wedge breakout)
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX