Lloyds shares are falling back to a key support level where buyers have previously stepped in.
The Lloyds share price has remained in a relatively tight range over the past year and the price has undulated between 45p-55p. On the face of it, this range looks like a trader’s dream.
The 45p level has held on three occasions over the past year and on two of these occasions, Lloyds shares have subsequently rallied to 50p and 55p, before falling back.
With the stocks now approaching 45p once more, investors will be weighing an entry. If support levels hold at 45p, one could expect a move back up to 50p-55p. However, a significant break of this level would open the door to 40p, possibly lower.
There is of course no certainty the price will simply bounce off 45p and fundamentals must be taken into consideration.
Lloyds has two core elements driving their fundamentals from a macro perspective.
Lloyds fundamentals
Firstly, UK inflation remains stubbornly high and the Bank of England will likely hikes rates again to control soaring prices.
Higher rates are good for Lloyds profitability and further rate hikes may lead to better than expected earnings later in the year.
However, the counterbalance to the upside scenario is the prospect of deteriorating UK economic health. If the UK’s economy is hit due to higher borrowing costs, Lloyds will have to set aside provisions for bad debts. This may offset higher net interest margins.
Nonetheless, investors confident of Lloyds earnings potential in the long term will be keenly watching LLoyds share price behaviour around the key 45p level.