- Summary:
- FTSE 100 Index chart: The UK benchmark index has faced another rejection from 7,900 level as predicted and is now heading towards 7,630 level.
Our previous FTSE 100 index (INDEXFTSE: UKX) forecast is playing out perfectly due to a rejection from the 7,900 level. The benchmark index of UK equities is once again in a downtrend after a strong bounce in April 2023. Our analysis shows that the FTSE 100 companies may have a tough year ahead as inflation remains high in the UK.
On Wednesday, FTSE 100 index fell by 0.36% after losing 28 points in the first half of the trading session. This resulted in the third red day in a row for the benchmark index and the 2nd consecutive week of the downtrend. There are multiple fundamental and technical factors behind this drop which are discussed below.
FTSE 100 Index Drops Amid Another ECB Rate Hike
This week’s FOMC meeting in the US concluded with another 25 bps rate hike. This was the 10th consecutive rate hike by the policymaker. The markets were already prepared for this hike, but the benchmark US induced still closed the day in the red. The effect rippled across the Atlantic as the UK markets also showed a negative price action today.
The European Central Bank is set to decide on the interest rates in the region today. Considering the recent 25 bps rate hike by the US Fed, ECB is also expected to hike the rates to a similar extent. Due to this reason, stocks of the UK mining companies fell today and dragged FTSE 100 index along with them.
FTSE 100 Index May Retest 7,600 Level Soon
My outlook on the INDEXFTSE: UKX remains unchanged from my previous analysis. As mentioned in that update, the index has faced a textbook rejection from the 7,900 level. This comes as no surprise as there were multiple confluences predicting this drop. As long as it remains below the 8,000 level, my outlook on the FTSE 100 index will remain bearish.
In the coming days, the UK benchmark index may retest the December 2022 high of 7,630. The outcome of this critical retest will decide the fate of the UK stocks. A breakdown below this level will be extremely bearish.
I’ll keep sharing my updated price outlook on FTSE 100 Index and other UK shares in my free Telegram group, which you’re welcome to join.
