Piece written by Alexa Smith, Trive Financial Market Analyst 

After a week in the red, a green candle introduces hope for the FTSE100 (LSE: UKX). The FTSE 100 has bore the brunt of aggressive monetary policy tightening by the Bank of England (BoE), which has hiked rates firmly in an effort to cool down inflation. However, inflation dismissed the central bank’s actions and remained steadfast while the British economy tipped into a deeper recession.  

While inflation remains high, a sharp drop in housing prices supports deflation, eliminating the need for further rate hikes and prompting BoE Governor Bailey to adopt a dovish tone. Will these movements mark the beginning of an uptrend for the FTSE 100, or will the broader downtrend succeed in taking the index futures lower?  

Technische Analyse 

A broader bearish trend is revealed on the 4H Chart with the formation of a descending triangle pattern. The downward trend commenced following the rejection of the 8014.52 major resistance due to aggressive monetary policy tightening by the BoE. A swing high attempted to gain upside traction as the price action edged over both moving average lines, but the 7716.34 resistance at the Golden Ratio stood its ground and encouraged a further pullback.  

Since the price action edged lower and cushioned at the 7418.17 support after rejecting the 50-day moving average line, the 7233.05 major support could mark a point of interest for the broader downtrend to play out if a breakdown of the 23.60% Fibonacci Retracement occurs. However, the 7418.17 support could hold and bolster the index futures towards the 7532.13 resistance. If a breakout from this level occurs, the upper boundary of the descending triangle may mark the continuation of a downtrend. 

Zusammenfassung 

A broader downtrend has plagued the FTSE 100 due to the aggressive monetary policy tightening by the Bank of England. If macroeconomic data releases support a recovering British economy, the index futures may be encouraged to retest the 7532.13 resistance. However, a leg down could occur towards the 7233.95 support if the BoE remains hawkish on the prospect of further interest rate hikes.  

Sources: TradingView, Trading Economics 

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