The Australian 200 Index (ASX: S&P/ASX 200) concluded the latest session with a 0.39% decline, marking two consecutive days of losses. This week’s performance further amplifies concerns as it is over 0.5% lower. Investor sentiment was dampened by disappointing corporate reports from key firms, including CSL Ltd, Macquarie Group, Seek, James Hardie Industries, and Breville Group. These losses coincided with a weak performance on Wall Street, as investors exercised caution ahead of a crucial US inflation reading, which could significantly influence the future outlook for interest rates.
Additionally, despite Australian consumer confidence reaching a 20-month high, as indicated by a private survey, the XJO faced headwinds. The business confidence index edged up in January, supported by manufacturing and construction, but overall business conditions dipped below the long-run average. This mixed economic backdrop contributes to the cautious sentiment in the Australian market.
Technical
The 4-hour chart shows that the index, closing at 7,602.9, is under the spotlight as traders turn their attention to the US for the upcoming CPI report. The price action recently broke below the 20-SMA (green line) but remains above both the 50-SMA (blue line) and 100-SMA (orange line). The 20-SMA’s recent upward crossover with the 50-SMA suggests potential short-term bullish sentiment. With a slightly downward-sloping RSI around the 50.53 level, the market appears to seek direction.
Short-term trading opportunities could materialize if the price breaks above the 20-SMA towards the 7,703.6 level. This breakthrough might target the 7,850.0 resistance. Conversely, a break below the 50-SMA could find significant support at the 23.60% Fibonacci retracement level (7,478.9). Sustained downward momentum may lead to a test of the 38.20% support at 7,339.8.
Summary
The Australian 200 Index faces a pivotal moment. The US CPI data will be the key catalyst, with a dovish surprise potentially triggering a breakout towards 7,703.6 and beyond. Conversely, a hawkish outcome could lead to a breakdown below 7,478.9, potentially extending the recent downtrend.
Sources: TradingView, Trading Economics, National Australia Bank, Westpac Banking Corporation, Melbourne Institute, Dow Jones Newswire, CNBC, Reuters.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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