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FTSE 100 Pushing Down on Support as GBP/USD Strength Weighs

FTSE 100 Price, Chart and Analysis:

  • Heavyweight exporters hit by recent GBP/USD rally.
  • Range support remains under threat.
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Recent Trading Range Under Pressure

The FTSE 100 continues to slide lower and is testing the lowerend of the recent trading range. The UK big board has oscillated in a rough 350 point trading zone with the lower bound around 5,930 currently under pressure. The FTSE has underperformed other European bourses and has barely recovered 40% of the late-January to late-March sell-off which saw the index lose nearly 3,000 points. The recent strength of Sterling, especially against the US dollar, will impact some of the FTSE’s largest export-companies, including heavyweight pharmaceutical companies AstraZeneca (AZN) and GlaxoSmithKline (GSK), and oil majors Royal Dutch Shell (RDSA) and BP (BP). When GBP/USD strengthens, export revenues when converted back to Sterling are worth less.

The technical set-up for the FTSE remains weak with support from the 20- and 50-dmas broken last week and now acting as resistance. The lower end of the trading zone is propped up by the 38.2% Fibonacci retracement level at 5,889, and if this folds a swing-low made on May 14 at 5,662 comes into play. This week’s highs and the 20- and 50-dma protect the 50% Fib retracement at 6,233 for now.

IG Client Sentiment data shows that 73.14% of traders are net-long of the FTSE, a contrarian bearish set-up. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger FTSE 100 bearish contrarian trading bias.

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FTSE 100 Daily Price Chart (December 2019 – July 31, 2020)

FTSE 100 Pushing Down on Support as GBP/USD Strength Weighs

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What is your view on the FTSE 100 – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.