Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
Technical Analyst, Saxo Bank Group
FTSE100 is trading in the resistance area at 7,473-7,514 and at the face of it looks a bit stretched testing its steep rising trend line and forming what appears to be arising wedge like pattern. However, RSI is not showing any divergence suggesting FTSE could move higher.
However, a correction could be seen. If FTSE closes below its rising trendline a correction down to around 7,295 is likely. A close below 7,294 could spur a sell-.off down to around 7,100
If instead FTSE breaks higher closing above 7,500 a move to 7,578 possibly 7,670 could be seen.
FTSE250 has now been rejected several times at the resistance at 19,645. A close below its rising trend line seems likely. A correction down to test of the medium-term falling (black) trendline and possibly also the 0.382 retracement at around 18,494 is seems quite likely.
If FTSE250 manages to close above 19,722 the Index could extend uptrend to 20,467
RSI divergence explained: When price is making a new high/low but RSI values are not making new high/low at the same time. That is a sign of imbalance in the market and an weakening of the uptrend/downtrend. Divergence or imbalance in the market can go on for quite some time but not forever. It is an indication of an exhaustion of the trend
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