The FTSE 100 broke down initially during the day on Thursday, crashing into the 7300-handle underneath. I believe that the market will find this area important, but this rally should offer a nice bit of a reprise as we await the results of the Nonfarm Payroll announcement. The effect on the US dollar of course will have an effect on the British pound in the GBP/USD pair, and therefore an effect on British exports. If the British pound rallies, that should be bad for the FTSE 100, but if the GBP/USD pair breaks down, that helps exports. Because of this, you have to keep one eye on the Forex markets, while keeping another eye on this index. Markets will be choppy regardless, but I believe it will take most of its signal from currency more than anything else.
The importance of the 7300 level
If we can break down below the 7300 level, then I think the market has a little bit of room to go lower, perhaps down to the 7200 level after that. Alternately, if we could somehow break above the 7400 level, the market should then go towards the 7500 level. Either way, I think we are going to be choppy and if we do not manage to break either one of those levels, then we are going to bounce around back and forth. Recently though, we have seen more negative pressure than anything else, so it appears that the market believes that the British pound is going to rally. If we did breakdown, I believe the move to the 7200 level could be rather strong. Otherwise, we are looking at a simple back and forth range bound type of strategy scenario that short-term traders will thrive in.
FTSE 100 Video 07.7.17
This article was originally posted on FX Empire