Has the FTSE 100 exhausted its momentum to the upside and would a correction seem natural?

So finally the Greeks and their creditors seem to have reached a deal to resolve the issue that has tormented the money markets over the past couple of weeks. Nevertheless though the FTSE 100 has gained over the last week when it seemed that a deal was close and managed to remain afloat throughout the days when Germany’s objections threatened to scrap the whole thing.

Last Monday the FTSE 100 was swept higher approaching the 6,700 points when widespread optimism for a final deal hit the wires and as I mentioned above the London index showed impressive resolve to actually end the week just shy of this important barrier. What is important to note is that the FTSE was able to do exactly that due to the fundamental support behind it having to do with the accommodative low-rates environment.

Today we finally found out that a deal has been reached and of course the FTSE opened even higher hitting the 6,770 points but the question now changes to whether the index can sustain these gains. In my opinion it’s important to mention two things: first, the deal still has some way to go as it has to pass from the Greek and the rest of European parliaments – and especially the former one will not be easy – and secondly, the index looks overstretched from a technical point.

So I have to say that I could see a consolidation forming at this point and possibly a re-test of the 6,700 points’ support. Any news of difficulties to pass the deal from the Greek parliament that appears torn could add to the technical outlook that hints that the FTSE is overbought and we could see a correction. My main support area lies around the 6,650 points but I doubt whether it can be broken downwards, however a correction towards it wouldn’t surprise me.

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