75bps rate rise | BoE today with 1.25% expected | 7220 7150 support | 7300 7348 resistance

75bps rate rise | BoE today with 1.25% expected | 7220 7150 support | 7300 7348 resistance

FTSE 100 Analysis | Signals | Forecast | Prediction | FTSE 100 Outlook | Trading help

London’s indices rose yesterday as strong results from companies including WH Smith lifted sentiment ahead of the US Federal Reserve meeting later tonight.
The FTSE 100 was up 1.2pc and the FTSE 250 index advanced 1.4pc after logging six straight sessions of losses amid fears of an economic slowdown.

The US Federal Reserve has raised interest rates by 75 basis points, the first such hike since 1994.

It was in line with market expectations that shifted on Monday following media reports that the central bank would likely consider such a move in wake of pickup in inflation data.

US stocks initially pared some of their day’s gains following the announcement before climbing as  Fed chairman Jerome Powell spoke to media, with the S&P 500 jumping 2.3pc.

Stocks and US equity futures rose Thursday but were off session highs, hampered by the prospect of a sustained campaign of Federal Reserve interest-rate hikes to get runaway inflation under control.

An Asian share gauge and US contracts rose less than 1% after a Wall Street rally that halted a five-day, 10% rout in the S&P 500.

US equities had advanced as markets focused on Fed Chair Jerome Powell’s comment that super-sized hikes will be rare. He was speaking in a briefing after the central bank increased borrowing costs the most since 1994.

Treasury yields had also tumbled Wednesday as traders pared bets on Fed tightening next month — no longer fully pricing in a three-quarter point move. But the notes subsequently reversed a chunk of that shift in Asian trading.

Powell signaled another big hike in July after the Fed raised rates by three-quarters of a percentage point, but added “today’s 75 basis-point increase is an unusually large one and I do not expect moves of this size to be common.”

Leaning against the risk of a string of jumbo moves spurred the now-ebbing relief rally. The dollar ticked up and the yen fell. Cryptocurrencies — emblematic of market stress due to tighter financial conditions — pared gains.

Wednesday’s decision took the target range for the federal funds rate to 1.5% to 1.75%. Officials projected 3.4% by year-end and 3.8% by the end of 2023. The Fed also reiterated it will shrink its balance sheet by $47.5 billion a month — a move that took effect June 1 — stepping up to $95 billion in September.

Xi Supports Putin
Chinese President Xi Jinping held his second phone call with Vladimir Putin since his Russian counterpart invaded Ukraine, in which he reiterated support for Russia’s security concerns. A report of the conversation largely repeated China’s prior comments on Russia, including a call for Putin and other nations to work toward a solution. Putin in turn offered his support for China on issues including Xinjiang, Taiwan and Hong Kong, saying Russia opposes any interference in China’s affairs. The conversation comes days after China issued one of the country’s strongest warnings yet about the risk of war over Taiwan.

FTSE 100 live outlook prediction analysis for 16th June 2022

Now the Fed is out the way, we move onto the BoE today and another expected rate rise, an increase to 1.25% this time. The FTSE100 has probably priced that increase in already as its been widely mooted. If they go for a larger increase then we may well see a negative reaction on the FTSE.

Initial support this morning is at 7250 just below the daily pivot of 7266. To start with though the 30m chart is bearish, which could well see us have a drop down to start with, probably as low as 7220 where we have the key fib and S1.

If the bulls can defend this then we should see a rise back towards the daily pivot, and possibly as high as the 7323 overnight high again. Above that then 7348 is R1, but also the first test of the 200ema on the daily since we crossed below it last week. As such that level may well see the bears have another go, and that could align with the S&P testing its 3840 resistance too.

Below the 7220 level then bears will be aiming for the 7150 level where we have the Hull MA on the 2h and just above the recent low (7130). 7137 is also S2 for today, so I would expect they would be keen to defend this area if we see it. It will be interesting to see how the US reacts today now they have digested the news. They managed a decent rally off the 3720 level again yesterday (and after that stop hunt on Tuesday down to 3705) so that level remains the line in the sand for the moment.

Generally today I am thinking that we get a bit of a dip but my well rally a bit later on, helped by the US. The 2h chart has gone bullish, and 7150 looks key should it get that low today. A rise towards the 25ema on the daily at the 7430 would make sense over the next few sessions though!

The bears have broken below the 3785 support overnight and a slide down to the 3735 level may well play out today as we have S1 here. The bulls will be keen to defend any dips today though to keep alive the hopes for a rise towards the 3800 and 3840 (200ema 30m) levels. Lower we have 2h support at 3685 so keep an eye on that for a possible test. 3670 is also S2.

Good luck today.

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