FTSE 100 Sits at Key Support Ahead of Earnings, BoE Decision

Summary:
• What is the outlook of the FTSE 100 index ahead of the BoE and Fed decisions? We explain what to expect in the coming days.

The FTSE 100 index has come under pressure in the past few weeks as focus shifts to the upcoming interest rate decision by the Bank of England (BoE), Federal Reserve, and the European Central Bank (ECB). It pulled back to a low of 7,724 on Monday morning, which was a few points lower than the year-to-date high of 7,881.

Fed and BoE decisions and key earnings ahead

The main catalysts for the FTSE 100 index are the soaring profit warnings in the UK and the upcoming interest rate decisions by the Federal Reserve and Bank of England (BoE). These meetings and decisions will provide more color about what to expect in the coming months. The two banks are expected to hike rates by about 0.50% as the battle against inflation rages on. If this happens, rates will likely rise to their highest points in over 15 years.

The other key thing moving the FTSE 100 index is the rising number of profit warnings in the UK. Data compiled by EY revealed that the number of profit warnings by listed companies in the UK rose by more than 50% in 2022. 18% of all listed companies warned about profits during the year. Most of the affected companies were in the retail and leisure industries and included companies like Asos and Boohoo.

The FTSE 100 index will also react to the recent earnings by some of the top companies in the index. Some of the top firms that will publish their results this week are Shell, GlaxoSmithKline (GSK), BT, and Vodafone. Shell, the biggest oil supermajor in Europe, is expected to publish robust results, helped by higher prices. Just last week, Chevron announced strong results and launched a $75 billion share buyback plan.

FTSE 100 index forecast

The downward trend has found strong support at 7,726, which was the lowest points on January 19, 25, and 27. It has struggled moving below this point several times this year. At the same time, it has fallen below the 23.6% Fibonacci Retracement point on the 4H chart. Moreover, the Relative Strength Index (RSI) has drifted below the neutral point at 40.

Therefore, the outlook for the stock is bearish ahead of the Fed and BoE decisions. If this happens, the next key support level to watch will be at 7,592, which is along the 50% Fibonacci Retracement levels. The stop-loss for this trade will be at 7,780.