Bottom line:  FTSE long term structure remains bearish until prices stay below 7724 resistance. In the short term, bears are looking to regain control as the indices approaches resistance around the 5975-6000 levels.

Fundamental Outlook:

FTSE had rallied last week by around 3% along with other global indices. Today, as we write the article the indice is up 1.5% trading around 5969 mark. The indices might be pinning hopes over post lock down as economies re-open in the US and Europe. Also, the easing US-China trade war fears might be reason behind the optimism. As IMF forecasts an inevitable drop (-3%) in Global GDP figures in 2020, it remains to be seen how long the rally could continue.

EURUSD had come under pressure last week and has dropped below the 1.0800 mark before seeing some buying around 1.0765. The Euro zone could be facing an economic contraction by over 7% in 2020, due to COVID-19 pandemic. The EURO would be taking cues from GDP Growth Rate figures to be out this week (Friday).

GBPUSD may find an uptick this week as the UK begins to re-open. UK Prime Minister Boris Johnson had laid out steps towards easing the lock down yesterday allowing manufacturing and construction work to resume. As economies re-open (US, UK and European Countries) Crude Oil demand is expected to surge again sending prices higher going forward.

Technical Analysis:

FTSE bears must be gearing to be back in control around 5975-6000 levels. After having print highs close to 6200 mark on April 30, 2020, the indice had reversed sharply towards 5635 mark. Over the past week, bulls have managed to produce a counter trend rally that could be close to terminating.

Also note that fibonacci 0.618 retracement of the recent drop between 6182 and 5635 is also seen around 5975 mark. High probability remains for a bearish reversal as FTSE would face strong resistance around 6000 levels.

Traders might be preparing to initiate fresh short positions around 5975-6000 levels, with protective stops above 6900 and projected targets below 4750 levels respectively.

Prepared by

Harsh Japee, Technical Analyst.

FTSE Chart

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