Technical analysis - it's hard to get away from the EU referendum and markets are beginning to sweat.



With recent polls potentially suggesting that Britain may vote to leave the European union we have seen a material shift in sentiment in EUR/GBP with prices reaching as high as 0.7905 showing the relative weakness of the pound. At present price activity has broken the downward trend and breached the underside of the neckline of the head and shoulders pattern, potentially questioning the validity of this reversal pattern.

However, thus far as I write this post at 11:30, we can certainly see the market is rather undecided by this current period of congestion at key levels. Currently price is consolidating in and around the neckline of the head and shoulders pattern, which is typically a reversal pattern, and around the 50% retracement of the entire move down. This potentially suggests that the recent rally could be facing material weakness at the 0.7865. However if this period congestion continues we could be building a potential bullish flag formation which if confirmed could suggest upside pressure to 0.7987 which is the 76.4% retracement of the move down. For the time being the tight range we are in is between 0.7860/0.7800 with resistance currently 0.7865 and 0.7900 respectively and support 0.7795 and 0.7775.



The FTSE price action has been rather sporadic as of late, as you can see by the chart the FTSE has been caught in a trading range between 6215/6055. Price broke out of this range to the upside on the 12/04 to make a high of 6433 and then returned back into this range on the 03/05 in which it consolidated for 14 days before making an assault in the 6215 level once again. The bullish marubozu candle on the 24/05 highlights the second attempt to breach this  range to the upside, with bulls firmly in control of this market pushing prices above the 50% retracement of the counter move lower. This bullish momentum seemed to come to a short end bringing prices as low as 6149, which just so happened to be the top end of the recent trading range, so far this has acted as support, until today.

The market faced considerable resistance at the 6285 level which interestingly coincide with the 61.8% retracement and the internal trend line from the highs of October last year. With price activity today breaching key short term support we have thus far witnessed the bears take full control of this market. The next potential support levels reside at 6100.00 which is the bottom of the previous range. Should the market turn around resistance could be faced at 6175 and 6215.

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