On Wednesday, the Australian 200 index (ASX: S&P/ASX 200) experienced a substantial surge, marking its most significant increase in over a year. The impetus behind this notable rise was the release of GDP growth statistics, with financial and mining stocks taking the lead. Contrary to market expectations, the quarter-on-quarter GDP growth slowed from 0.4% to 0.2%, boosting the demand for riskier assets.
The current index level is at its highest since late September, signalling a positive market sentiment. Investors are factoring in the likelihood of interest rates remaining steady at 4.35%, and there’s a growing belief that rate cuts may occur sooner than anticipated. This development adds an extra layer of intrigue to the market dynamics, making it an exciting time for traders ahead of Friday’s pivotal NFP release in the US.
Technical
On the 4H chart, the recent uptrend has resulted in the formation of a rising wedge, leaving open the door for a potential breakdown in the upcoming sessions. However, the 25-SMA (green line) trades above the longer-term SMAs, and with the 50-SMA (blue line) recently crossing above the 100-SMA (orange line), the momentum is tilting toward the bullish side.
The supply zone at 7,198.0 is a critical one in the upcoming sessions, potentially offering resistance to the current momentum. If a pullback occurs, support at 7,142.7 could come into play, with the 61.8% Fibonacci golden ratio being present at the dynamic support of 7,102.8. While strong support may exist here, a breakdown could lead the index toward 7,036.1, the Fibonacci midpoint, where it converges with the 50-SMA.
However, if the supply zone fails to contain the momentum, the recent bullish surge could continue through the end of the week. Higher resistance is established at 7,281.1 and could be a critical level to the longer-term trend of the index.
Summary
After Australia’s GDP figures missed consensus, the Australian 200 index soared to new 11-month highs. As we advance, the supply zone at 7,198.0 could be critical in determining whether the rising wedge will result in a breakdown.
Sources: Koyfin, Tradingview
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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