FTSE 100 Approaches Key Long-Term Resistance Zone

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Can the FTSE 100 rise further still or is it likely to soon fail?

Axel Rudolph, Market Analyst at IG comments on what this means:

FTSE 100 Continues To Rise

The FTSE 100 continues to gradually rise, shrugging off the UK Conservative Party’s confidence vote in its prime minister, Boris Johnson, in which 41% of ministers of parliament (MP) voted against his leadership, and weaker than expected British in-store and online retail sales which declined by 1.5% in May because of rising living costs versus an expected +0.2%.

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The index is approaching key long-term resistance at 7,648 to 7,690 which is likely to thwart any further advance, at least in the course of this week. It consists of the January 2020 as well as this year’s February, April, May and current June highs. Having said that, while global risk-on sentiment retains the upper hand, as it has done for the past couple of weeks, and while last week’s low at 7,518 underpins on a daily chart closing basis, overall upside pressure should be maintained.

An advance and daily chart close above the 7,690 January 2020 peak would engage the July 2019 high at 7,730. Failure at the 7,518 on a daily chart closing basis may lead to another down leg taking shape with the 200-day simple moving average (SMA) and the March-to-June uptrend line at 7,350 to 7,316 being back in the picture. Provided that yesterday’s low at 7,571 holds, though, immediate upside pressure remains in play.

The DAX 40 continues to rise as China opens up its economy after a two-month long lockdown and ahead of Thursday’s European Central Bank (ECB) meeting, having last week slid back to but then bounced off the 14,315 to 14,282 support area which contains the early and mid-May highs. A rise above Monday’s high at 14,712 would lead to the major 14,840 to 14,927 resistance are being targeted. It represents a previous key support area, made up of the May 2021 to February 2022 lows, which was slipped through in late February and which, due to inverse polarity, acted as resistance in late March.

Above it meanders the 200-day SMA at 15,050. Strong support remains to be seen between the early and mid-May as well as last week’s low at 14,315 to 14,282. While it holds, a bullish bias remains in play."

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