GBP/USD and FTSE 100 Technical Analysis Summary
GBP/USD Analysis
The GBP/USD currency pair has recently experienced a significant decline, reaching a 13-month low at 1.2250. This drop is attributed to a surge in UK government bond yields, particularly the 30-year gilt, which has hit its highest level since 1998. The 10-year gilt yield has also risen to levels not seen since 2008. The combination of rising gilt yields and a falling pound indicates a capital flight as investors express concerns over the UK's fiscal and inflation outlook.
From a technical perspective, GBP/USD is trading within a falling channel, having dropped from a high of 1.34 in September to its current low. The price has broken below a significant trendline that dates back to 2007, as well as the April 2023 low. The Relative Strength Index (RSI) suggests that further losses are possible, as it trades out of oversold territory.
Traders are eyeing potential further declines towards the 2023 low of 1.2030. For any recovery to take place, the pair would need to reclaim the resistance level at 1.2575, which is the weekly high, before targeting the 1.26 mark.
GBP/USD Forecast Chart
FTSE 100 Analysis
In contrast to the GBP/USD, the FTSE 100 index has shown resilience, rising to an almost 4-week high of 8290. This increase is largely driven by the weaker pound, which benefits multinational companies listed on the index by providing a favorable exchange rate. The FTSE 100 has extended its recovery from a low of 8000 in late December, moving above both the 200 and 100 Simple Moving Averages (SMA).
Technical indicators suggest that buyers are looking to extend gains towards the next resistance levels at 8325 and 8400, aiming to break out of the trading range that has persisted since April of the previous year. On the downside, support is identified at 8220, which corresponds to the 200 SMA. A break below this level could bring the 8000 mark back into play.
FTSE 100 Forecast Chart
Conclusion
In summary, the GBP/USD pair is under significant bearish pressure, with technical indicators supporting the potential for further declines. Conversely, the FTSE 100 is experiencing upward momentum, aided by a weaker pound, with technical analysis suggesting a bullish outlook as long as key support levels hold.