Piece written by Alexa Smith, Trive Financial Market Analyst
The FTSE100 (LSE: UKX) has been subdued in anticipation of the Bank of England’s interest rate decision this afternoon. The UK has been struggling with persistently high inflation, but both headline and core inflation subdued after the BoE aggressively hiked interest rates by 50 bps last month.
Although headline and core inflation reported lower-than-expected figures of 7.9% and 6.9%, respectively, the Bank of England may be encouraged to hike rates by another 25 basis points today as inflation remains high. Additionally, earnings releases have been subdued as 94% of the companies within the index trade within the red due to poor earnings releases and the country’s ongoing struggle with persistently high inflation. While prospects of further rate hikes may push the UK into a recession, high inflation seems to be a more pressing issue.
A downward trend seems to be in full swing on the 4H Chart, with major support and resistance established at 7,231.21 and 7,915.15, respectively. Bullish momentum attempted to stage a reversal but was met with resistance at the 7,710.77 level, which encouraged a pullback towards the 7,449.33 support at the 38.20% Fibonacci level.
Since the price action established support at the previous resistance level of 7,449.33, a breakdown of this level may encourage further downside momentum towards the 7,231.21 major support, as the index intersected below the 50-day moving average. However, the 7,449.33 or 7,231.21 support levels could hold, which may encourage a leg up towards the 7,710.77 resistance, marking a possible pivot point towards the 7,915.15 major resistance.
The FTSE100 is slipping further into the red on the backdrop of poor earnings and the BoE’s interest rate decision expected today. If the BoE hikes rates by 25 basis points, the index may succumb to the 7,231.21 major support. However, the 7,449.33 level could hold, which may encourage a leg up towards the 7,710.77 resistance.
Sources: TradingView, Office for National Statistics, Trading Economics, Reuters, Fidelity
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