The FTSE 100’s outlook hinges on the employment report on Wednesday

So after a quiet and non-volatile few days for the FTSE 100 last week the London index is trading lower today breaking below the 6,700 points’ support that limited any price action during the previous sessions. During the time I am writing these lines to you I can see a correction attempt from the FTSE that is trying to recover and climb back above the 6,700 points’ barrier again.

The question then becomes what’s the outlook for the index for the week ahead and how we should approach the London benchmark. I have been talking about the need for a correction in the FTSE for the past couple of weeks but I am quite surprised to see that investors are putting pressure on the index today after the mixed US jobs report last Friday.

The report was not as bullish as analysts expected and we can see evidence of that in the way the US stocks markets’ futures are trading ahead of the US session, all the indices are pointing higher in order to reflect the less bullish levels of the NFP report. So the FTSE is not in sync with how the rest of the global markets are trading and no one can say that we expect a change of rate policy in the UK any time soon that would explain this divergence.

So my outlook is cautious this morning, from a technical standpoint a correction is justified but the fundamental environment in the UK doesn’t support such a development. I think that technically the rejection of the 6,700 points’ resistance might prove a decisive move for the London index and if that should be the case then I will be looking to short the FTSE towards the 6,650 lows and possibly lower. To the upside I would be a bit more cautious, probably remaining neutral as I am not convinced that the index can climb to new highs.

My focus is on the employment-related reports on Wednesday and I believe that any fresh data could turn the tables on FTSE’s outlook. A host of strong results could put the BoE under pressure to discuss the possibility of an early 2016 rate hike thus sending the London stock market lower and my targets would be as mentioned above. I would like to see how the labor market has performed during the past month before committing into any serious trades this week so I will be on the lookout for any major swings after Wednesday morning.

If you want daily analysis and signals on the FTSE 100 then my NewsletterPro – Forex Opportunities™ service might be of interest to you. You can find more information on the NewsletterPro by clicking on this link.

alpesh 12th aug

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