FTSE COVID concerns battle with upbeat Chinese GDP data EUR/USD in focus ahead of Italian confidence vote & Eurogroup meeting.

FTSE Forecast on Blue Monday

• Risk aversion is dominating amid concerns over the economic impact of rising COVID cases.
• Upbeat Chinese GDP data +6.5% YoY is helping to offset some of the gloom, 
• UK & US are ramping up their vaccination programmes, although COVID number remain elevated.
• US stock markets are closed for Martin Luther King Day.

FTSE technical analysis

The FTSE continue to trade within the ascending channel dating back to early November. The index failed to break the upper band of the channel in early January and has been extending he move lower.

Whilst the longer term outlook remains bullish for now near term the picture ios turning bearish. The FTSE trades below its 20 and 50 sma and the 20 sma has crossed below the 50 sma in a bearish crossover. The RSI is in bearish territory but not yet oversold suggesting more downside could be on the cards.

Immediate support can be seen at 6700, the overnight low, prior to horizontal support at 6645. A move below 6645 and then 6615 the lower band of the ascending channel is needed to negate the medium-term bullish trend.

On the upside, a break above the 20 sma at 6764 could open the door to 6800 50 sma and round number ahead of horizontal support at 6875.

EUR/USD below 1.21 with Italian politics, COVID in focus

• The Euro is trading a few pips lower intraday as it heads towards the European open
• Italian PM Conte faces a confidence vote in the lower house today, which he is expected to win, although he could struggle in the Senate vote tomorrow.
• COVID numbers continue surging in Europe & US and risk off dominates supporting USD
• Eurogroup & Italian CPI in focus today & the ECB later in the week

EUR/USD technical analysis

EUR/USD experienced heavy selling across the end of last week which extended the corrective slide from the multi-year high of 1.2353 reached earlier this month. 

The pair closed the week at a 6 week low and then refreshed multi week lows in the Asian session.

The pair trades below its 20 sma and is currently testing the 50 sma at 1.2080. The RSI is in bearish territory but not oversold, suggesting more downside could be on the cards. 

A meaningful break through 50 sma at 1.2080 could see horizontal support at 1.255/60 tested. A break through here could re-affirm the bearish outlook and see the sell off accelerate to the key 1.20 psychological level.

An attempted recovery and the 50 sma holding could see the pair push higher towards 1.21 round number before bringing support turned resistance 1.2130 and the 20 sma at 1.22 (FXE).