Strong Sterling And FTSE 100 Advance
Thierry Laduguie | Sep 20, 2017 12:19
When the FTSE declined below 7200 last week, I was expecting a rally. This has been the textbook pattern in recent years, large declines are bought. Based on the pattern which is a falling wedge, it is still possible the FTSE will decline to 7150 before rallying but odds of this decline happening are diminishing.
With the S&P in an uptrend and sentiment bullish, I can’t imagine the FTSE at 7150 unless we get a massive rally in the pound. This is possible because the pattern in GBP/USD since the top at 1.3619 is a triangle. A triangle in an uptrend is bullish, this is probably a fourth wave in which case the next move is the fifth wave up and the target is 1.3700.
Such a rally accompanied by the small pull back in the S&P could push the FTSE to 7150. Tonight we will have more clarity on the GBP/USD pattern when the FOMC statement is released at 7pm. If the FOMC statement depresses the dollar, the pound will rally and this will confirm the pattern (fifth wave up). The Fed will probably give more details on its plan to reduce the size of its balance sheet, and will leave rates unchanged. If the Fed thinks inflation will remain low due to recent economic numbers and the impact of hurricane Irma on the economy, the dollar will soften and GBP/USD will rally.
This rally will depress the FTSE, however I believe any further decline in the FTSE at this stage should be bought. I expect a bounce to 7450-7550 in the next few weeks, so any decline to 7150 will present a buy opportunity.
Get The App
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.