The FTSE 100 index has rallied 6% over the past six trading days, quelling fears surrounding the potential of a no-deal Brexit.
The 1.5% gain on Tuesday comes after German chancellor Angela Merkel’s positive comments about a Brexit deal being struck, stating that “there is still time.”
10-year support holds strong
The index fell 16.5% between July’s high and December 27th, eventually bouncing off support between 6600 and 6800.
The diagonal support trendline remains intact from the low of the 2009 financial crash to the present day, with the index going on to rally 65% and 35% on the previous touches in 2009 and 2016, respectively.
A breakout from the 200 exponential moving average on the daily chart could signify a reversal of the FTSE’s downtrend of the past eight months.
Brexit sentiment improving
— jeroen blokland (@jsblokland) February 5, 2019
The market uncertainty surrounding Brexit seems to be on the wane. Britain’s Prime Minister Theresa May has now survived a no-confidence vote in the Houses of Parliament and also got a vote rejecting the potential of a no-deal Brexit over the line.
While the possibility of a no-deal Brexit is still on the table, Merkel’s comments today imply that a deal may still be struck.
Speaking at an economic conference in Tokyo, Merkel, as quoted in the Mirror, said: “From a political point of view, there is still time.
“That should be used, used by all sides.
“But for this it would be very important to know what exactly the British side envisages in terms of its relationship with the EU.”
GBP/USD showing signs of strength after falling to two-year low
The British pound has also been in a significant uptrend since December 11th, rising as high as 6% before failing to break out of the $1.32 level of resistance.
It has fallen slightly in the last week, now retesting the $1.30 level, which seems to be pivotal moving forward.
The latest move to the upside comes after the January 3rd low of $1.23, which was the lowest point the pound has fallen to since March 2017.
Last month, Citigroup wished traders “good luck” ahead of the meaningful vote on a Brexit deal, suggesting high volatility would make for a risky trade.
However, since that date, the pound is up 1.25% against the dollar.
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