FTSE 100 & CAC 40 Price Outlook:
- The FTSE 100 jumped Monday morning, moving toward trendline resistance
- Not to be outdone, the CAC 40 shot above 5,000 as it moves within reach of horizontal resistance
- How to Trade FTSE 100
FTSE 100 & CAC 40 Forecast: Stocks Surge to Start the Week, Resistance Eyed
European indices began the week with a roaring start as risk appetite seemingly swept the market, allowing stocks across the Atlantic to begin on a similarly strong foot. The rising tide of equity demand sent the FTSE 100 and CAC 40 rocketing toward technical resistance that has worked to keep both markets contained. While the recent spike may be an encouraging sign for bulls, summer conditions might make it difficult for a confident break out to be posted.
FTSE 100 Forecast
To that end, the FTSE 100 will have to negotiate a few technical barriers before it can look to exit the trading range that it has maintained since early June. First on the list is the nearby descending trendline derived from the index’s June peak – a line that has displayed some influence over price in both July and August. Should it fall, bulls could then set their sights higher, perhaps aiming at the Fibonacci level around 6,225.
FTSE 100 Price Chart: 4 – Hour Time Frame (June 2020 – August 2020)
That said, I am hesitant to suggest the FTSE 100 forecast has changed materially as resistance around 6,300 looms over the index still. A brief attempt higher was punished just two weeks ago, so a break above the level is likely required before the FTSE 100 can establish an attack higher with confidence.
Unfortunately, summer conditions and the upcoming Jackson Hole Symposium may limit market appetite to establish such a move at this time. Thus, the FTSE 100 is undoubtedly off to a strong start, but I believe little has changed in the medium term outlook until persistent attacks at the 6,300 are seen.
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CAC 40 Forecast
Much of the same can be said for the CAC 40. A parabolic move on Monday sent the index above 5,000, but resistance around 5,200 remains the more formidable opponent in my opinion. Consequently, range trading opportunities could remain attractive when considering a position in the CAC 40. In the event of risk aversion, the Fibonacci level near 4,700 will likely mark an area of potential support for the French equity index.
CAC 40 Price Chart: 4 – Hour Time Frame (May 2020 – August 2020)
Until a larger move that can test the barriers above and below the current price range is established, it seems the CAC 40 and FTSE 100 are vulnerable to further range-bound movement. In the meantime, follow @PeterHanksFX on Twitter for updates and analysis.
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–Written by Peter Hanks, Strategist for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX