The FTSE 100 Digests Its Losses

Risk-aversion in the financial markets is abating which lifts the FTSE 100 and it seems fair to expect the FTSE 100 to digest its losses today. I assume that short-term traders will be booking profits at current levels given that the FTSE 100 lost 9.52% of its value over the last two weeks, substantially fattening the gains on short positions.

Also lowering the stress in markets are comments by the Japanese Chief Cabinet Secretary Suga, Finance Minister Aso and Economy Minister Ishihara, all of whom have voiced concerns about the strong Japanese yen and the possibility of market intervention. This has influenced the FTSE 100 as there is a strong correlation between the USDJPY and global stock markets, whereby a selloff in the USDJPY may trigger a decline in global stock markets and vice versa.

Technical Trend is Bearish Below 5717

The technical trend is bearish below the February 10 high of 5717 and the FTSE 100 may reach the June 26, 2012 low by next week, while a break to 5717 may trigger a rally to the 5800.

E.U. Industrial Production declined by 1.3% YoY in December, which points towards as slower E.U. economic growth, yet the market is disregarding this for now. Later today we look forward to U.S. Retail Sales and University of Michigan Consumer Sentiment. A better than expected reading may boost the FTSE 100, while a soft reading may trigger declines. 

FTSE 100 | FXCM: UK100