The ASX 200 index has bounced back in the past few days as investors watch the Fed and RBA decisions and the improved relations between China and Australia. The index jumped to a high of $7,000 on Tuesday, higher than last week’s low $6,728. It remains by more than 8% from the highest point this year.
RBA rate hike
The Reserve Bank of Australia (RBA) concluded its two-day monetary policy meeting on Tuesday. Unlike the Federal Reserve, European Central Bank (ECB), and Bank of England (BoE), the bank decided to hike interest rates by 0.25%.
The reluctant rate hike happened as the country’s Consumer Price Index (CPI) continued rising. The headline CPI remained above 5% in the third quarter. In a statement, the new RBA governor warned that inflation will reach to the 2% target by 2025.
Most analysts now believe that the RBA will not hike interest rates again. Instead, the bank will likely maintain rates at the current rate in the foreseeable future. It will then slash interest rates in 2024 as growth slows.
The Federal Reserve, on the other hand, left rates unchanged between 5.25% and 5.50% in its meeting last week. It also hinted that it will leave rates intact in the coming months since inflation is easing while the labor market is moderating. Global stock indices usually react to actions of the Federal Reserve.
The ASX 200 index also reacted to the improved relations between China and Australia. In a statement, China agreed to restart buying Australian goods like barley and coal. This is notable since China is Australia’s biggest trading partner.
Looking ahead, the index will react to upcoming earnings by some of the biggest companies in Australia. On Monday, Westpac published strong financial results and boosted its dividend payouts.
NAB Bank will publish its financial results on Thursday while Commonwealth Bank will release its numbers on November 14th. ANZ Bank will release its results on November 13th. These are important companies that form a core part of the S&P/ASX 200 index. The other companies to watch will be Australian Potash, Orion Metals, REA Group, and Xero.
ASX 200 index forecast
ASX 200 chart by TradingView
The S&P/ASX 200 index has bounced back in the past few days. It has jumped above the important resistance point at $6,823, the lowest point on March 21st. It has also retested the crucial resistance level at $7,000, the lowest swing on July 10th.
Despite the comeback, the ASX 200 index has moved below the 50-day 100-day Exponential Moving Averages (EMA). The Relative Strength Index (RSI) has moved above the neutral point at 50.
The index has formed a small doji candle. Therefore, there is a likelihood that the index will continue falling as sellers target the key support at $6,823. A move above the resistance point at $7,100 will invalidate the bearish view.
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