FTSE falls to a key technical level as sterling rallies hard on soft Brexit optimism and solid UK data

FTSE was falling back to a key technical level on Tuesday as sterling burst up onto the 1.30 handle out of a symmetrical triangle, helped along by reports that the so-called 'Malthouse agreement' was now dead.
UK jobs data was solid and coupled up with last week's retail sales data nicely, despite the Brexit uncertainties.
The FTSE 100 fell by 40.30 points or 0.56% to 7,179.17.

Ross J Burland FXStreet

The 'Malthouse agreement' was requiring Westminster to either renegotiate the Irish backstop or pursue a managed 'no deal' withdrawal from the European Union. However, there were wires crossing that this was now not an option, although a spokesman for Downing Street reportedly said that reports of the death of the Malthouse agreement were being exaggerated - Nevertheless, GBP/USD move don to 1.3070 and EUR/GBP met a low of 0.8685 - (Punished on trade war news between the US and EU at a time when the EZ is already struggling). As for data, the Office for National Statistics showed that UK wage growth remained at its post-crisis high at the end of last year, well above inflation with average wage growth holding steady at 3.4%.

Best and worst performers

On the corporate front, HSBC, the FTSE 100's largest company by market value reported a 1.0% fall in adjusted net profits for the fourth quarter to reach $3.39bn, falling well short of a consensus estimate for $4.4bn. It also posted a 5.0% rise in adjusted revenues to $12.56bn, albeit short of expectations. The top three performers were, Micro Focus International (MCRO) 1,812.00p +3.63%, TUI AG Reg Shs (DI) (TUI) 852.80p +3.24% and Coca-Cola HBC AG (CDI) (CCH) 2,633.00p +2.69%. The worst performers of the top flight index were HSBC Holdings (HSBA) 637.10p -4.01%, followed by Rentokil Initial (RTO) 344.10p -2.77% and then lastly, BAE Systems (BA.) 511.60p -2.52%.

FTSE levels

The FTSE dropped out of a descending triangle on sterling's rally out of the hourly symmetrical triangle. The daily stochastics were well overbought in the FTSE, indicating the buyers would stop buying. The 7190/80 level support area didn't hold and a mean reversion of 50% of the move from 8th Feb lows to 7164 played out. The price has since gains some traction there and closed a touch higher. However, if that level gives, then bears can target a firmer 7060/70 area (made up of 38.2% Fibo of May 2018 highs to Dec 2018 lows and Feb/Mar 2018 and Feb 8th 2019 lows). To the upside, bulls need to get through the 200-D SMA at the round 7300 level, a moving average that was last tested and breached momentarily back in Sep 2018. A break of the 200-D SMA will look for the 61.8% Fibo target located at 7381.

Author

Ross J Burland

FXStreet

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

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