The Australian 200 Index Futures (ASX: S&P/ASX 200) simmers with bullish fervour, riding a wave of positive sentiment fuelled by reassuring inflation data and cautious optimism from the Reserve Bank of Australia (RBA). Minutes from the December RBA meeting revealed encouraging progress on the inflation front despite keeping rates unchanged at 4.35%. While the central bank considered a 25 basis point hike, they opted for a pause, emphasizing data dependence and a balanced approach to navigating the economic landscape.
This dovish tilt sent a wave of relief through the market, particularly evident in energy stocks. However, a note of caution lingers. Household consumption remains weak, and the RBA acknowledged the painful squeeze on finances many Australians face. This highlights the delicate balancing act they face – combating inflation without stifling economic growth. Furthermore, global uncertainties and potential rate hikes by the US Federal Reserve could introduce volatility in the coming weeks.
Technical
The 4-hour chart technical picture paints a compelling bullish narrative. The index futures currently trade at 7,489.0, comfortably above the 20-SMA (green line), 50-SMA (blue line), and 100-SMA (orange line), highlighting sustained positive momentum. The upward-sloping 20-SMA sits comfortably above the 50-SMA and 100-SMA, confirming this bullish trend.
The RSI, though at overbought territory at 79.33, maintains an upward slope, suggesting continued buying pressure. This confluence of indicators points towards potential further gains.
Should the bulls maintain momentum, the first resistance level lies at 7,537.0. A break above this point could confirm the bullish trajectory and pave the way for 7,606.2. Conversely, a bearish push could bring the initial support at 7,405.0 into play. A breach below this level could expose further downside towards 7,314.3 and 7,228.9.
Summary
The Australian 200 Index stands poised for further gains, fuelled by RBA optimism, positive market sentiment and strong technicals. While a pullback remains possible due to the overbought RSI, the underlying bullish trend appears intact.
Sources: Australian Bureau of Statistics, TradingView, Trading Economics, Reuters, MT Newswire.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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