Two trades to watch: FTSE looks over bought, EUR/USD tests 1.23

After surging 3.5% yesterday FTSE has moved into overbought territory EUR/USD seen easing lower but uptrend remains

Charts (4)

Where next for the FTSE after its stellar run?

• Stocks across the board are pushing higher boosted by the prospect of a Blue wave, shrugging off the storming of Capitol Hill.
• UK steps up its vaccination programme in a race against time to reopen the UK economy
• FTSE set to extend gains after soaring 3.5% in the previous session

The FTSE has been trading in an ascending channel which dates back to early November. Yesterday’s surge, broke the FTSE price out of the upper band of that channel pushing it to a session high of 6859 where it closed. 

Whilst the break-out of the upper band of the ascending channel, and the price trading over the 20 & 50 sma on the daily chart suggest an established bullish trend, the RSI is over 70 in over bought territory which means a pullback could be on the cards. 

Immediate resistance is the key 7000 psychological level, beyond which 7063 high 26 Feb and 7220 high 25 Feb, from there there isn’t much resistance until the pre-pandemic Feb high of 7400.
Immediate support can be seen at 6850 the ascending trendline resistance turned support. A break through here could open the door to 6650, horizontal support which has capped gains across December and 6560 the 20 sma. It would take a break below the lower band of the ascending channel at 6500 to negate the current.

Learn more about trading indexes

EUR/USD pulls back but bullish trend remains

• Germany factory orders smashed forecasts +2.3% MoM vs -1.2% exp. 
• Looking ahead EZ retail sales & CPI die at 10:00 GMT
• US Dollar has mixed reactions to Democrat win & Capitol storming. On the one hand it is being boosted by sage haven flows but pressure comes from rising bond yields.
• Jobless claims and covid statistics in focus

EUR/USD trades -0.1% but is still holding above 1.23, after taking three days to find acceptance above the key psychological level. 

It trades above its 20 & 50 sma on the 4 hour chart and above its ascending trendline dating back to early November. The RSI is also in bullish territory, trending high but below over bought levels, suggesting more upside.

However, the recent rally stalled at 1.2350 and has rebounded lower. The bullish trend remains in tact above 1.2250.

Immediate support can be seen at 1.23, should the price break through this key level, the next key support is at 1.2260, the confluence of the 50 sma, the ascending trend line and horizontal support from yesterday’s low. Beyond here  1.2150 and 1.20 come into focus.

On the upside immediate resistance is at 1.2350 a break through here could see the bulls target 1.24.

Learn more about trading forex

Build your confidence risk free

More from FTSE 100

Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.