CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure. CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure.

GBP/USD set to trend higher, stronger pound weighs on easyJet shares

Sterling continues to gain ground on the US dollar, but a stronger pound is weighing on easyJet shares and the FTSE 100 more broadly.

  • easyJet shares tumble amid stronger pound
  • Technical analysis suggests GBP/USD will trend higher
  • Stronger pound weighs on FTSE 100 index

The pound once again made headway against the US dollar on Tuesday, but a strong pound is weighing on easyJet shares and the FTSE 100 more broadly, with the blue-chip index extending losses on Tuesday.

The low-cost airline continues to struggle amid ever-changing travel restrictions due to the coronavirus pandemic, with the company’s share price dragged lower after its flights to Portugal surged in price after the UK threatened to add it to its ever-growing quarantine list.

Flights from London airports to major destinations throughout Portugal cost less than £20 earlier in August, with the budget airline offering discounts in celebration of the country being awarded an ‘air-bridge’ by UK authorities.

But 12 days later, ticket prices for flights to Portugal skyrocketed above £300 after the UK government did a complete 180 and reintroduced a two-week quarantine restriction for all British travellers returning from the country.

The FTSE 100 closed 1.7% lower on Tuesday at 5862 points, while easyJet shares fell 4.7% to 603p per share.

FTSE 100 firmly on the back foot

After declining throughout last week, the FTSE 100 finds itself back at the 5950 area that marked support at the end of July, according to Chris Beauchamp, chief market analyst at IG.

‘This rather critical area has seen buyers step up in the past, but a close below 5900 would likely open the way to more downside, with 5727 and 5497 as first-line targets,’ he said.

‘The past five sessions have seen a series of higher lows on the intraday chart, and until that changes, perhaps with a move above 5980 then the overall bearish impression remains in place.’

Brexit fears doing little to dent GBP sentiment

Brexit talks have provided little reason for optimism after yet another failed round of talks between the UK and EU.

With just four-months until the transitional period is over, the chance of an all-encompassing trade deal between the two sides appears less likely by the day.

Nevertheless, the depressed nature of the pound means that there is likely to be long-term value, which is already being realized despite the ongoing economic worries

GBP/USD: technical analysis

GBP/USD has similarly been on the rise, with the price trading at eight-month highs, according to Josh Mahony, senior market analyst at IG.

‘Crucially, we are approaching the critical $1.3515 resistance level, where a break above that point would bring about a two-year high,’ he said.

‘With the price back at trendline resistance, we could see some weakness come into play over the short term,’ Mahony added. ‘However, whether we see a short-term pullback or not, a bullish outlook is in play unless the price breaks below the $1.3356 swing low.’

How to trade stocks with IG

Looking to trade easyJet and other stocks? Open a live or demo account with IG and buy (long) or sell (short) shares using derivatives like CFDs in a few easy steps:

  1. Create an IG trading account or log in to your existing account
  2. Enter ‘easyJet’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

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