By IFCMarkets

Britain’s Conservative Party has lost its parliamentary majority, which may complicate Brexit

According to the election results on June 8, 2017, the Conservative Party of Great Britain has lost its majority in Parliament, initiated by the Prime Minister and Conservative Party leader Theresa May. Some investors believe that this will complicate the procedure of Brexit. Will FTSE 100 Index prices fall?

Note that Britain’s decision to leave the European Union (Brexit) was adopted in a referendum on June 23, 2016. The official negotiations on its conditions will begin on June 19, 2017. It is assumed that they will take 2 years. German Chancellor Angela Merkel said that the UK’s financial obligations towards the EU will be discussed at the first stage of talks. At the same time, the signing of a trade agreement between them is possible only after the completion of all the Brexit procedures. Angela Merkel also said that the British should not have the “illusion” about their rights in the European Union after Brexit. Their rights will be less than the rights of residents of the European Union. Weak economic data may become additional negative factors for the UK Stock market. The Manufacturing Production Index turned out to be zero in April after an increase by 2.3% in March in annual terms. The Industrial Production Index, with the exception of Construction, decreased by 0.8% in April in annual terms, while in March, its growth was 1.4%. Let us also note an increase in inflation up to 2.9% in May compared to 2.7% in April.

On the daily timeframe, GB100: D1 continues to be in a rising trend. Over the past 12 months, it has increased by 27%. A downward correction is possible in case of the worsening of macroeconomic and corporate indicators of Great Britain.

• The Parabolic indicator gives a bearish signal.
• The Bollinger bands have narrowed, which indicates low volatility.
• The RSI indicator is above 50. It has formed a negative divergence.
• The MACD indicator gives a bearish signal.

The bearish momentum may develop in case GB100 falls below the last fractal low coinciding with the date of the last parliamentary elections at 7440. This level may serve as an entry point. The initial stop-loss may be placed above the last fractal high, the historic maximum, the Parabolic signal and the upper Bollinger band at 7640. After opening the pending order, we shall move the stop to the next fractal high following the Bollinger and Parabolic signals. Thus, we are changing the potential profit/loss to the breakeven point. More risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop level 7640 without reaching the order at 7440, we recommend cancelling the position: the market sustains internal changes that were not taken into account.

Summary of technical analysis

Market Analysis provided by IFCMarkets