The FTSE 100 index (LSE: UKX) sits poised for potential upside ahead of the Bank of England’s (BoE) interest rate decision, buoyed by positive earnings reports and cautious optimism. Leading the charge are Shell, with a dividend boost and share buybacks fuelling a 3.15% gain, and BT, up 0.58% after exceeding revenue and profit expectations.
However, the picture remains nuanced. Despite the US Federal Reserve maintaining rates and dismissing March cuts, dampening global risk appetite, the FTSE 100 managed to gain 0.3%. Investor attention now shifts to the BoE, with a close call expected between keeping rates unchanged or initiating a May/June cut.
Market sentiment awaits clues from the BoE’s updated forecasts and Governor Bailey’s press conference. Hawkish commentary, downplaying rate cuts and emphasizing inflation concerns could strengthen the pound and potentially lift the FTSE 100. Conversely, dovish hints about future cuts might weigh on the pound but could find favour with growth-oriented sectors like technology.
Technical Analysis:
The 4-hour chart shows that the index currently stands at 7,668.24, trading slightly higher ahead of the BoE interest rate decision. The price action is above the upward-sloping 20-SMA (green line), 50-SMA (blue line), and 100-SMA (orange line), indicating positive momentum. The recently crossed 20-SMA above the 50-SMA signals a bullish trend. With the RSI at 63.97, short-term trading opportunities could emerge towards the resistance level at 7,689.69 should bullish momentum persist.
A break above this resistance could pave the way for further gains towards the 7,726.50 and 7,764.37 levels. Conversely, if the upward push falters, short-term trading opportunities may arise towards the 23.60% Fibonacci retracement at 7,622.29. A breach below this level could bring the 38.20% Fibonacci retracement (7,580.59) and 50.00% Fibonacci retracement (7,546.89) into play.
Summary:
The FTSE 100 enjoys a positive technical setup and has found support from encouraging earnings reports. The BoE’s decision remains the key driver, with mixed implications depending on their stance. A hawkish BoE could solidify the upward trend, while dovish hints might introduce short-term volatility but potentially benefit specific sectors.
Sources: TradingView, Dow Jones Newswire, Office for National Statistics, MT Newswire.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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