Rolls-Royce shares downside risk grows below GBX 1,355
Rolls-Royce is exploring a return to the narrowbody aircraft engine market. Meanwhile, its shares are testing the key GBX 1,355 level ahead of the company's earnings report, with geopolitical tensions adding to market uncertainty.
Rolls-Royce is continuing development of two UltraFan variants, including a 30,000-pound-thrust engine designed for narrowbody aircraft. The company aims to build and test a prototype by 2028.
To support the project, Rolls-Royce is seeking backing from the UK government and is considering a strategic partnership to share development costs and technological risks. A return to the narrowbody engine market could become an important long-term growth driver, although the project remains at the conceptual stage and is unlikely to have a material impact on near-term financial results.
Rolls-Royce breaks support as 50-day SMA comes into focus
As highlighted previously, the base-case scenario continues to play out. Rolls-Royce shares failed to hold the GBX 1,355 support level and declined toward GBX 1,330, where the 50-day simple moving average (SMA) is currently located.
The GBX 1,355 level remains the key technical threshold in the short term. If today's trading session closes below this level, the probability of a move toward the GBX 1,330–1,320 range will increase.
Conversely, a close back above GBX 1,355 would signal a short-term rebound and increase the probability of a retest of GBX 1,380.
Geopolitical risks create mixed outlook for Rolls-Royce
Geopolitical tensions are having a mixed impact on Rolls-Royce. Rising defense spending could continue to support the company's Defence division, while Brent crude above $90 per barrel may weaken the outlook for airlines and create headwinds for its Civil Aerospace business.In the short term, the market's reaction to the GBX 1,355 level is likely to remain the key technical signal. At the same time, any further escalation of geopolitical tensions could increase volatility ahead of the company's earnings report on July 30.
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