FXOpen
On Monday, the UK observed a bank holiday for May Day, and on Tuesday, the stock market demonstrated accumulated optimism.
The FTSE index (UK100) today surpassed the 8300 mark. Additionally:
→ The opening occurred with a bullish gap;
→ On the daily chart of UK100, today the RSI indicator is in overbought territory, unseen since the beginning of 2023.
One of the significant drivers of bullish sentiments could be considered events on Thursday – at 14:00 GMT+3, news from the Bank of England is expected: market participants will learn about the decision on the interest rate, followed by a press conference.
As Econoday writes:
→ A decision to cut interest rates is unlikely at Thursday's meeting, with autumn being seen as the most probable period for a 0.25-point rate cut from the current level of 5.25 points.
→ Members of the rate-setting committee are concerned that inflation is slowing down too slowly. However, the trend is in the right direction, and the Bank of England has already stated that the 2 percent target does not necessarily need to be reached before interest rates are lowered.
Perhaps the anticipation of signals for monetary policy easing instils confidence in the bulls, but how sustainable can the current growth be?
As shown by the technical analysis of the UK100 chart:
→ The price is moving within a long-term ascending channel (shown in blue). Meanwhile, its upper boundary is around the price level of 8500, which could serve as resistance if market sentiment remains equally optimistic;
→ On the other hand, the price of UK100 is vulnerable to some correction. If it occurs, former resistance at 8200 may provide support. As indicated by the violet lines, successful tests of former resistance underscore the bullish nature of the market.
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