Two Trades To Watch: FTSE As UK Lockdown Could Get Tougher, Gold Tests Key Support

 

Downtrend 2

FTSE under pressure with COVID in focus 

  • The broad mood in the market has soured following unexpectedly weak US non-farm payroll data, which saw payrolls shrink by 140,000. 
  • COVID cases in the UK continue to surge remaining above 50,000 new daily cases. The UK government is threatening tighter lockdown restrictions. 
  • The is no major UK data.  

FTSE 100 index chart analysis 

The FTSE is seen consolidating after last week pushing above the upper band of the ascending channel which dates back to early November. So far, since the start of the new year the upside has broadly been capped by 6920, whilst the downside is being held by 6800. 

The FTSE is currently trading at 6860, approximately mid-way between this horizontal channel as it tests support of the upper band of the ascending channel. Should it slip below then a retest of 6800 could be on the cards. Acceptance below here could see the 50 sma on the 4 hour chart at 6675 come into play.

Should the support at 6860 hold the FTSE could look to retest 6920 before a move towards 6990.  

Gold rebounds off multi day low, 200 sma in focus 

  • Gold is extending losses on Monday after a slump of over 4% across the previous session amid a strengthening US Dollar and rising treasury yields. 
  • US Dollar Index + 0.27% - the US Dollar usually trades inversely to gold as a stronger greenback  
  • US Treasury yields remain elevated amid growing expectations of additional fiscal stimulus. Weak NFP data added to the case. 

Gold chart analysis 

The Gold price failed to maintain a move higher above the descending channel which has been in place since early August, indicating weakness in the price above $1900. 

The Gold price fell through the key 200 sma on the daily chart on Friday and hit a low of $1817 in early trade on Monday although the move lacked follow through 

The precious metal has managed to move back above the 200 sma at 1836. This is remains the key level to watch on the downside before another test of the daily low and the psychological support at $1800. A move toward the November low at $1765 looks unlikely for now. 

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