FTSE Technical Analysis: Sell-Off Eyes Fibonacci Support

FTSE 100 Price, Chart and Analysis

  • Sterling rebound leads the FTSE lower.
  • Bearish retail sentiment will worry FTSE bulls.

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FTSE Battered by Sterling Strength

The upswing in Sterling’s fortune mid-week, prompted by EU negotiator Michel Barnier offering an olive branch to the UK over Brexit, has hit the UK big board hard and pushed it back towards multi-week lows. A stronger Sterling weighs on the heavyweight exporters in the FTSE 100, crimping their profits unless they are hedged against GBPUSD swings.

The daily chart below shows price action around the August 15 low, which is currently holding, with the next support level – Fibonacci 50% retracement – over 100 points away at 7.372. The index has also broken below the 200-day moving average and further bearish momentum would bring the 61.8% retracement level at 7,247 into view. A break and close below the August 15 low at 7,458 could spark the move lower.

UK corporate releases are fairly thin on the ground next week, apart from a few builders reporting, which should leave the FTSE 100 traders watching developments in the FX market closely.

FTSE Daily Price Chart (February – August 31, 2018)

FTSE Technical Analysis: Sell-Off Eyes Fibonacci Support

Bearish Retail Sentiment

A look at the IG Client Sentiment Indicator shows 59.8% of retail traders are net-long of the FTSE 100. We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests FTSE 100 prices may continue to fall. 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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— Written by Nick Cawley, Analyst

To contact Nick, email him at nicholas.cawley@ig.com

Follow Nick on Twitter @nickcawley1

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