FTSE 100 (UKX) Is in a Downtrend, a Drop to Level 6633.60 Likely

FTSE 100 (UKX) Is in a Downtrend, a Drop to Level 6633.60 Likely

Resistance Level: 7500, 7600, 7700
Support Level: 7300, 7200, 7100

FTSE 100 (UKX) Long-term Trend: Bullish
FTSE 100 is retracing after rejection from the recent high. The share has retraced to level 6735.70. There is a likelihood of further downward move. The RSI is in the uptrend zone at level 58. UKX is likely to retrace to the support above level 6600 or above the 21-day SMA before the upward move.

UKX – Daily Chart

Daily Chart Indicators Reading:
The 21-day SMA and 50-day SMA are sloping upward indicating the previous trend. Presently, the share is at level 58 of the Relative Strength Index. It indicates that the UKX is in the uptrend zone and it is capable of resuming upward movement.

FTSE 100 (UKX) Medium-term Trend: Bearish
On the 4-hour chart, the share is in a downward move. On the January 7 uptrend, a retraced candle body tested the 61.8% Fibonacci retracement level. The retracement indicates that the share will fall to level 1.618 Fibonacci extension a. That is, the share will reach level 6633.60.

UKX – 4 Hour Chart

4-hour Chart Indicators Reading
The share is above the 20%range of the daily stochastic. It indicates that the share is in a bullish momentum. The 21-day and 50-day SMAs are sloping upward indicating the uptrend.

General Outlook for FTSE 100 (UKX)
FTSE 100 (UKX) share is falling. According to Fibonacci tool analysis, the share will fall to level 1.618 Fibonacci extension or the low of 6633.60.


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FTSE 100 Analysis: Brexit, Covid-19, UK ETF, and Many More

FTSE 100 Analysis: Brexit, Covid-19, UK ETF, and Many More

The United Kingdom’s country-specific exchange-traded funds have traded considerably well since December, as investors across the globe have been pacified by the recent developments in the post-Brexit deal with the EU.

Since October last year, the currency-related Invesco CurrencyShares British Pound Sterling (NYSEArca: FXB) has grown by 5.6%, while the iShares MSCI United Kingdom ETF (NYSEArca: EWU) climbed by a whopping 27%.

The FTSE 100 (UKX) has grown by about 8% since December in dollar terms and has outperformed the S&P 500, the MSCI World, and the Euro Stoxx, despite the UK being one of the worst-hit nations by the COVID-19 pandemic.

Also, the FTSE 100 maintains a steep discount compared with other markets, with a forward price to earnings ratio of 15x. Meanwhile, the Euro Stoxx index and the SPX trade at over 18x and 23x, respectively.

In other news, the UK has successfully reached an agreement on its trade deal with the EU, eliminating previous uncertainty-induced price action. However, there’s still much to be discussed.

That said, as more investors flood back into British markets, many believe that the GBP could benefit significantly from the influx in demand for UK-based assets.

The Chief Economist at Toscafund Asset Management, Savvas Savouri, noted that the GBP’s fundamental value in euro is around €1.30 apiece, but remained depressed around €1.12 on Wednesday due to accumulated fears that Brexit would be costly and messy.

Savouri noted that “at some point, there will be a big transaction that will make FX traders wake up and realize the pound is undervalued,” adding that “we’ve gone through the quagmire of political uncertainty in a way that the U.S. and other European countries haven’t yet” in a recent interview with the Wall Street Journal.

In other news, CNN reported overnight that President-elect Joe Biden was considering distributing another stimulus package as large as $2 trillion. This should provide a significant boost to equity markets, including the FTSE.

However, strong gains in the index will likely get frustrated as European governments tighten coronavirus lockdown restrictions, as fears about the fast-spreading new COVID-19 strain first discovered in the UK.

Meanwhile, Italy—whose government is on the cusp of a collapse as political tensions heighten—plans to extend its COVID-19 restrictions to the end of April. The Netherlands plans to also extend its lockdown by at least three weeks, while France considers extending its nationwide-imposed curfew.

These are the factors currently driving the price dynamics in the FTSE 100 in the near and medium-term.

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