FTSE Technical Outlook – Wedge Breakout Fake-out Furthered by BoE

FTSE TECHNICAL HIGHLIGHTS:

• FTSE wedge breakout on Tuesday reversed
• Brings support into play around 7500
• Generally choppy conditions not ideal

THE FTSE’S FAKE-OUT BREAKOUT CATCHES LONGS LEANING THE WRONG WAY

Yesterday, the BoE raised rates by 25 bps to 0.75%, in line with expectations, but this didn’t keep the FTSE or sterling from having decent-sized moves. Prior to yesterday’s drop, on Tuesday, the FTSE broke higher out of an ascending wedge but reversed back inside it on Wednesday setting up the fake-out breakout.

With the market ‘trapped’ on the false breakout more fuel for selling was provided not only for yesterday’s decline, but should help lead to additional weakness in the days ahead. Looking lower is support at 7508, then the 200-day at 7479.

The caveat to trading the FTSE right now is two-fold; one, it’s been a choppy market in general, and, two, it’s August. Typically, if this month doesn’t have anything eventful in the way of risk-off it can be a quiet one as traders leave the desk to squeeze in vacation before school starts.

Keep an eye on the U.S. markets, there may be some reason to look for at least a little risk-off in the weeks ahead if certain developments take shape. Check out yesterday’s commentary on the S&P 500 and Nasdaq 100, along with what we had to say about the DAX if it broke its month-long channel (which it did yesterday).

FTSE DAILY CHART (WEDGE REVERSED)

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