ASX200 closing in on 12 month high despite RBA caution on housing

At this afternoon's RBA Board meeting the RBA as expected, kept its key monetary policy settings unchanged including the target of 10 basis points for the cash rate and the yield on the 3-year Australian Government bond, as well as the parameters of its bond purchase program.

Australia

The RBA reiterated that it does not expect to raise interest rates until inflation returns to within the 2-3% target band for a sustainable period, as well as the need for a stronger labour market and higher wages growth. Conditions that it estimates are unlikely to be achieved until 2024 at the earliest.

There was some speculation in the lead-up to today's meeting that the RBA might intensify its commentary surrounding the booming Australian housing market. This proved to be spot on as the RBA sounded a warning note on lending standards in the paragraph below.

“Given the environment of rising housing prices and low-interest rates, the Bank will be monitoring trends in housing borrowing carefully and it is important that lending standards are maintained.”

Despite this, following a strong overnight lead from offshore equity markets, including a third straight session of NASDAQ outperformance as alluded to last week here, the ASX200 has enjoyed its best day since early March, to be trading at 6896.50, +67.80pts or 0.99% at the time of writing.

Learn more about trading indices

Technically, today's break above the band of resistance coming from the four highs in March near 6860ish is a positive development that has the ASX200 within one good session of testing the February 2021, 6938 high. A break above 6938ish would then allow the ASX200 to extend its rally towards the top of the trend channel, currently near 7050.

On the downside, near-term support at 6860/40 should hold to keep today’s short-term break higher intact. To keep the medium-term bullish bias in place, the ASX200 has no right closing below trendline support 6710/00ish.

ASX200 closing in on 12 month high despite RBA caution on housing

Source Tradingview. The figures stated areas of the 6th of April 2021. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation


More from AUD

Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.