Talking Points
- The FTSE’s break to last week’s low opens the door for a decline to 5600 and the trend is short-term bearish below yesterday’s high of 5917
- Tension is increasing around the world with traders betting on the Hong Kong Dollar and Saudi Arabia Riyal to abandon their peg to the Dollar
- U.S. CPI and Housing start on tap in today’s session, but they will probably have limited impact on overall sentiment
Today, the FTSE 100 (FXCM: UK100) breached last week’s low of 5737. This triggered a decline to 5700, a level mentioned yesterday. But the FTSE 100 may slide even lower in the coming days ahead, as the next major level for the index is the November 2012 low of 5600. The short-term trend will be bearish as long as price trades below yesterday’s high of 5917. Traders who are not already short will probably wait for a correction to the 5772 to 5832 range before considering whether to participate in this downward trend as good risk/reward ratio is sought.
With commodity markets continuing to slide and soft data from China and U.S. over the last few weeks, market tension will probably remain high. The bearish momentum in stock markets themselves is high enough to have triggered more problems. As an example, the traders are speculating on the Hong Kong Dollar abandoning its peg to the USD, which has in turn driven the currency to its 2007 levels in just one month. Also, Saudi Arabia is under pressure and bets on devaluation are the highest in at least 2 decades, triggering its government to order halt of Riyal Forward Options to limit the pressure on its currency.
While the issues mentioned above will not necessarily affect the FTSE 100 in a linear fashion, traders will be on their toes.
How are traders positioned in the UK100? Download the FXCM Snapshot App to know.
FTSE 100 | FXCM: UK100
Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano
--- Written by Alejandro Zambrano, Market Analyst for DailyFX.com
Contact and follow Alejandro on Twitter: @AlexFX00
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