The UK 100 Index declined in recent days in response to the currency crisis in the Turkish Lira and a fall in commodity prices globally. Yesterday was an exceptionally bearish day for stocks as fears grew in the tech sector and spread to the larger market over Chinese issues. The Index dropped over 180 pips falling under 7600.00. Resistance has been retested this morning at 7535.00 as price attempts to make its way back higher. The zone around 7600.00 includes the 7591.95 level and a break back higher in the coming days can see the market revisit 7672.32 with a view to testing the trend line at 7775.00.
The break lower seems bearish at first glance but unless price drops below 7400.00 in the next week the pattern being painted is one of a potential bull flag in a daily time frame. This could have a target in the region of 8500.00 provided price remains bid and turns higher. A loss of 7400.00 may signal an altogether more bearish development with support at 7333.30 and 7300.00 the last hopes for a bounce in the August/ September time frame. A loss of the latter can see price slide to 7188.65 with an extended fall finding support at 7077.00 ahead of 7000.00.
The move lower in GBPUSD has forced an unwinding of long positions over the last week as the 1.3000 level was decimated. The fall from the trend line break at 1.3800 has achieved over 1000 pips and has found some support at 1.2675 ahead of 1.2600. This former level gives traders a point of control to work with. A break lower could find light support around 1.2540 or stronger support at 1.2366 just below 1.2400. A move down past 1.2200 would see price enter the support zone ahead of 1.2000 where price bottomed after the Brexit vote in 2016. A hard brexit can result in a move to parity against the USD.
A break above 1.2778 puts the focus back at 1.3000 which is quickly becoming a psychological level for traders. A short squeeze higher can flourish should this level be quickly tested and a short lived V-shaped recovery follow on. Any market positive brexit headlines could provide the catalyst for this to occur. The 1.3200 is showing itself to be resistive followed by the 1.3370 area. Above these levels 1.3620 comes into play.