FTSE 100 Technical Analysis

Thursday, 17th October 2019 09:01 - by Rajan Dhall

GBP is massively capping gains at the moment, most of the companies on the FTSE 100 denominate their profits in dollars. GBP/USD has recently moved from 1.22 to 1.28 in four days worth of trading.

The general equities landscape is still positive. Last week the US and China agreed on a phase 1 deal but this has not been signed yet and apparently, will be on November 16–17, in Chile. The tone from the two major trading nations is still positive but there are some key outstanding issues. Huawei is one of them and intellectual property theft is another major concern but the fact that things are moving in the right direction is pleasing equities markets.

Back to Brexit now, and it seems things as looking better here too. Today there is a 2 pm deadline for some kind of draft bill but the DUP are playing hardball and say they will not give in to any concessions over the Irish border. However, the EU and number 10 both say there is a chance that the deal may get through. As always there are source reports saying that a chance of a deal is shrinking. So it seems like its a binary event at the moment.

Looking at the technicals on the weekly chart it seems we are stuck in a consolidation zone between 7000 and 7500. The strong pound is capping gains while the positive global risk sentiment is supporting bourses worldwide. The 7k is the key level for me at the moment as if it breaks we get a lower low lower high wave formation and 6518 is the next support. On the upside, there is a trendline that could act as resistance but the high of 7903.5 is the main target for the bulls. Once the Brexit story gets old if the deal is pushed through the FTSE will play catch up to the rest of the major global indices but if the deal is blocked we could see some near term strength as the pound falls and gains would be capped by the political situation. The worlds central banks are easing now and if the Brexit deal is rejected the BoE have said they will support markets so that would be another positive for the FTSE. It is all very messy at the moment but the overall bias is a positive one.

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.