Nudged lower by a twelfth successive rate hike by the Bank of England (BOE), the FTSE100 (LSE: UKX) is trading 2.09% off its second-quarter peak. In line with expectations, the BOE raised rates by 25 basis points to take interest rates to 4.50% as the U.K. battles with persistent double-digit inflation.

Traders feared the move could negatively affect the FTSE100 companies as borrowing costs would surge, further weighing down on earnings and growth prospects. However, a recovery is in progress as bullish traders rose from the dead. Will bulls sustain a move higher, or is there a cap to the upside?

Technical

After forming a peak for the second quarter, at the 7947.00 level, the FTSE100 retraced towards the 100-day moving average and 50% Fibonacci Retracement level. Support was established at the 7406.48 level, while the second quarter peak formed the resistance level.

Bullish traders will likely be vying for the 7947.00 level if a reversal from the 50% Fibonacci Retracement at the 7674.12 level occurs. With RSI conditions pointing to oversold levels, a reversal from the midpoint of support and resistance is probable.

Alternatively, a break below the 50% Fibonacci Retracement level could signal that the market is still in bearish mode. If bears take precedence, the 7406.48 level will likely be in contention.

Summary

The Bank of England reiterated its commitment to lowering inflation to within the 2% target by staying the course (rate hikes). With interest rates at their highest in almost 15 years, and with more to come, the FTSE100 will likely experience less friction to the downside. If higher rates continue to water down equity valuations, the 7406.48 level will probably be the FTSE100’s destination.

Sources: Reuters, TradingView