FTSE falls to a key technical level as sterling rallies hard on soft Brexit optimism and solid UK data

• FTSE was falling back to a key technical level on Tuesday as sterling burst up onto the 1.30 handle out of a symmetrical triangle, helped along by reports that the so-called 'Malthouse agreement' was now dead.
• UK jobs data was solid and coupled up with last week's retail sales data nicely, despite the Brexit uncertainties. 
• The FTSE 100 fell by 40.30 points or 0.56% to 7,179.17.

The 'Malthouse agreement' was requiring Westminster to either renegotiate the Irish backstop or pursue a managed 'no deal' withdrawal from the European Union. However, there were wires crossing that this was now not an option, although a spokesman for Downing Street reportedly said that reports of the death of the Malthouse agreement were being exaggerated - Nevertheless, GBP/USD move don to 1.3070 and EUR/GBP met a low of 0.8685 - (Punished on trade war news between the US and EU at a time when the EZ is already struggling). As for data, the Office for National Statistics showed that UK wage growth remained at its post-crisis high at the end of last year, well above inflation with average wage growth holding steady at 3.4%.

Best and worst performers

On the corporate front, HSBC,  the FTSE 100's largest company by market value reported a 1.0% fall in adjusted net profits for the fourth quarter to reach $3.39bn, falling well short of a consensus estimate for $4.4bn. It also posted a 5.0% rise in adjusted revenues to $12.56bn, albeit short of expectations. The top three performers were, Micro Focus International (MCRO) 1,812.00p +3.63%, TUI AG Reg Shs (DI) (TUI) 852.80p +3.24% and Coca-Cola HBC AG (CDI) (CCH) 2,633.00p +2.69%. The worst performers of the top flight index were HSBC Holdings (HSBA) 637.10p -4.01%, followed by Rentokil Initial (RTO) 344.10p -2.77% and then lastly, BAE Systems (BA.) 511.60p -2.52%. 

FTSE levels

The FTSE dropped out of a descending triangle on sterling's rally out of the hourly symmetrical triangle. The daily stochastics were well overbought in the FTSE, indicating the buyers would stop buying. The 7190/80 level support area didn't hold and a mean reversion of 50% of the move from 8th Feb lows to 7164 played out. The price has since gains some traction there and closed a touch higher. However, if that level gives, then bears can target a firmer 7060/70 area (made up of 38.2% Fibo of May 2018 highs to Dec 2018 lows and Feb/Mar 2018 and Feb 8th 2019 lows). To the upside, bulls need to get through the 200-D SMA at the round 7300 level, a moving average that was last tested and breached momentarily back in Sep 2018. A break of the 200-D SMA will look for the 61.8% Fibo target located at 7381.