Two Trades To Watch: FTSE Tests 6540, EUR/USD Holds Gain

Charts (5)

  • European shares have open with a positive bias on Brexit & US stimulus optimism ahead of the first covid vaccinations in the US.
  • US stimulus talks are slowly advancing as moves are made to break the deadlock.
  • Brexit talks continue past Sunday’s deadline with both sides looking to go the extra mile to get a deal done.

FTSE wavers on GBP strength
• Underperforms EU peers
• Dragged lower by stronger pound which is boosted buy Brexit optimism
• BoE in focus later in the week.

The FTSE has traded a tight range across December. It slipped below its ascending trend line dating back to late November on Friday. However, it has managed to hold above the 50 sma on the 4 H chart across the month to date. 

The index rebounded off 6645 high last week and is testing the 50 sma and the 2018 low at 6540 a key level. A break through here could provoke a deeper sell off to 6450 100 sma.  It is worth noting that the RSI has just turned higher, although the descending trend remains so there could be more down side to come.

Should the FTSE hold above the 50 sma  & 2018 low of 6540 then the next level to test on the upside will be last week’s high & the ascending trend line resistance at 6645. A meaningful move above this trend line could see a fresh move towards 6670 high from early March.

EUR/USD holds gains, near -term target $1.2175
• EUR/USD holds above $1.21
• Germany announces hard lockdown 
• USD slips on safe haven outflows as covid vaccine programme starts & amid US stimulus optimism.
• Eurozone industrial production up next

The pair failed to capitalize on a post ECB push above the descending channel dating back to early December, which could be considered a bearish sign. However, dip buying seen in early trade on Monday and a move back above the descending channel supports the chances of more upside to come. The pair also trades above its 50 & 100 sma on 4 chart. With that in mind a move toward YTD high$1.2175 and beyond to $1.22 remains a possibility. Any follow through in breaking above $1.22 could see the pair attack $1.2235.

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