Royal Mail Share Price Faces Threats from CWU Action and Ofcom Probe

The Royal Mail share price is trading higher this Friday but has shed some of its gains as it continues to face some pressure from the unresolved situation involving the company and the labour unions to which its workers belong. There has been a long-drawn battle between the Communications Workers Union and the Royal Mail Group over employee wages.

After months of negotiations without any agreement in place, the Royal Mail Group and other employers housing members of the CWU have planned to apply arbitrary pay increases. The CWU workers in Royal Mail Group have rejected the proposed 2% pay hike, saying it amounts to a pay cut in an environment where inflation is approaching 10%. A strike action now seems inevitable.

The Royal Mail share price is also facing pressure from a pending Ofcom probe for failing to meet its delivery targets for 2021 and 2022. The UK’s Office for Communications (Ofcom) says that Royal Mail did not meet any of its postcode targets, including a minimum of 93% delivery of first-class stamped and metered mail within 24 hours in 118 postcodes and 98.5% delivery of second-class mail within three working days. 

Price action on the daily chart has broken below the channel’s lower border, taking out the support at 281.7 and converting this level into a new resistance from which the bears were able to push back today’s price action. This barrier will be the ceiling to the price action as it trades in a range that also has the 268.2 price mark as the floor.

Royal Mail Share Price Outlook

The recent bounce off the 268.2 support (17 November 2020 low and 13 June 2022 low) has met resistance at the 281.7 price mark (17 November 2020 high). If the bulls successfully uncap this level, the 295.7 resistance (24 November 2020 low) becomes the next target in line for the bulls. Additional targets to the north are found at the 310.8 and 317.1 (13 May low) resistance levels. If the price action transcends the latter, the resistance at 333.6 (7 March and 3 May lows) becomes the next upside target. 

On the other hand, a decline below the 268.2 price mark brings the 250.3 support level into play, being the site of a previous low of 10 November 2020. An additional support level at 227.0 exists below this level, as this is where the 2 November 2020 low resides.

Royal Mail Group: Daily Chart