Are FTSE 100 futures heading for a new three-month low?

The FTSE 100 is heading lower yet again, with yesterday’s gains proving fleeting within a period of downside and, with its price heading back towards the 6057 support level, there is a chance we could see further downside if that 6033-6057 zone is broken, according to IG analyst Josh Mahony.

‘Such a breakdown would signal the possibility of another lower low given the move seen in late July,’ he said. ‘With that in mind, it makes sense to watch for a possible sharp decline from here if that support zone if broken.’

‘Should such a move occur, we would be looking at either a 76.4% retracement (5957), or yet another low (below 5852),’ he added.

FTSE 100 gives up gains on Tuesday amid rising US-China tensions

The blue-chip index slipped back into negative territory on Tuesday closing at 6072 points, as investors grow increasingly concerns about a spike in coronavirus cases around the globe and a rise in US-China tensions.

The US Commerce Department opted to impose even tighter restrictions on Huawei’s access to foreign chip makers, making life more challenging for the Chinese telco at the expense of damaging relations between the world’s two largest economies further.

The new rules imposed by US President Donald Trump’s administration effectively ban non-US chip companies from selling their chips to the Chinese telco without special permissions.

The move makes it extremely difficult for Huawei to source the necessary components it needs from abroad and will likely lead to officials in Beijing retaliating with restrictions of its own.

‘Huawei and its foreign affiliates have extended their efforts to obtain advanced semiconductors developed or produced from US software and technology in order to fulfil the policy objectives of the Chinese Communist Party,’ US Commerce Secretary Wilbur Ross said.

‘As we have restricted its access to US technology, Huawei and its affiliates have worked through third parties to harness US technology in a manner that undermines US national security and foreign policy interests,’ he added. ‘This multi-pronged action demonstrates our continuing commitment to impede Huawei’s ability to do so.’

FTSE 100 rebound starts to fail

The FTSE 100 rebound seen on Monday has started to fail once more today, with the index falling back towards trendline support, Mahony commented earlier on Tuesday’s session.

‘The wider declines seen throughout the past three-months signal the possibility of another leg lower from here, with lower lows seen since late June,’ he said. ‘The key to whether this is going to be the beginning of another bearish phase is whether price drops below the upcoming 6057 and 6033 support levels.’

‘For now, those levels and the ascending trendline will be critical in determining where we go from here,’ he concluded.

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