The Australian 200 Index (ASX: S&P/ASX 200) closed 0.08% lower, ending a three-day winning streak at 7,659 on Tuesday, caught in a brawl between hawkish RBA minutes and tepid commodity performances. The minutes revealed the RBA considered a February rate hike but opted to wait, citing moderating inflation and weaker economic data. This mixed message fuelled uncertainty, leaving investors hesitant.
On the positive side, inflation seems to be cooling, bolstering hopes for future rate cuts and potentially attracting yield-hungry investors. Additionally, ANZ Group’s successful acquisition of Suncorp’s banking business sparked optimism in the financial sector.
However, headwinds persist. RBA hawkishness suggests further rate hikes remain possible, pressuring the index. Commodity prices, a key driver for the index, fell due to demand concerns in China, dragging mining and energy stocks lower.
Technical Analysis:
On the 4-hour chart, the index closed at 7,652.9 as the markets reacted to the RBA’s meeting minutes, which showed that the bank considered further rate hikes. The 20-SMA comfortably sits above the upward-sloping 50-SMA and 100-SMA, indicating short-term bullish sentiment. The RSI (56.67) hovers slightly above the 50.00 level, suggesting potential price stability and indecision.
Short-term trading opportunities could exist towards the all-time high of 7,703.6 price level should the price action break sustain a break above the SMAs. A sustained break above 7,703.6 and bullish RSI confirmation could trigger a move towards 7,850.0.
However, a break below the shorter-term SMAs would leave the 23.60% Fibonacci retracement level (7,478.9) to provide significant support, with a break likely to confirm the bearish momentum. A break below the 23.60% Fibonacci retracement, supported by bearish RSI signals, could lead to a decline towards the 38.20% Fibonacci retracement level (7,339.8) support level.
Summary
The XJO faces an uncertain near future. RBA’s wait-and-see stance offers hope for rate cuts, but hawkish undertones and weak commodities pose challenges. Technically, the index clings to support near key SMAs. A breakout above 7,703.6 could signal bullish momentum, while a breakdown below 7,478.9 might trigger a downtrend.
Sources: TradingView, Trading Economics, Dow Jones Newswire, Reserve Bank of Australia, Reuters.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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