FTSE 100 Turns Lower Following BoE, Creates Bearish Bar off Resistance
- FTSE 100 turns lower following no cut by the BoE
- Created a bearish reversal bar at Aug ’15 resistance
- Near-term bias shifts lower, support and resistance levels highlighted
In Wednesday’s commentary, we viewed the rally into yesterday’s BoE decision as a “buy the rumor, sell the news” scenario. The outcome was not quite what the market was expecting, with a vote by the MPC of 8-1 to leave rates unchanged; the market had an 80% chance of a 25 bps cut price in, and thus there really wasn’t any ‘news’ per se. But the bank’s monetary policy committee did say if things don’t turn for the better quickly that they expect to make a move in August.
The FTSE 100 was sitting near the highs of the session prior to the announcement and sold off a bit following, but nothing too aggressively. However, a bearish ‘pin’ bar formed as a result with the highs coming right around a swing high created last August. This points to weakness in the short-run at the least, especially given how steep the rise has been since the June 24 puke lows.
The first area of support was tested around the 6585/628 vicinity this morning, which is the upper-end of the last swing high to start the month. A stronger decline below initial support looks probable and will likely find support no lower than the 6412/88 vicinity; this is the longer-term resistance zone which was conquered on June 30 when the BoE’s Carney hinted towards a summer stimulus package.
On a move above the Wednesday high the market will likely find resistance at the July 2015 high just over 6800 and the mid-6800s from June of last year.
FTSE (UK100) Daily
To conclude, the bias has shifted to the downside at this time until we see some of the recent rally work off overbought conditions.
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX.
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