ASX200 loses steam after promising start ahead of RBA minutes

The Australian economic data calendar is light on this week. The most notable feature is the release of the RBA meeting minutes for the October board meeting at 11.30 am tomorrow Sydney time.

With little in the way of new guidance for monetary policy coming from the meeting, the focus will be on further details around the RBA’s expectations for inflation in the near term. And points of  discussion around macroprudential policy and its impact on the housing market.

Following a further easing of restrictions today in Greater Sydney for those fully vaccinated, the ASX200 started the new week on a positive note looking to build on last week’s 0.6% gains.

The bulk of last week’s gains coming from the Materials (3.0%) and Information Technology (1.8%) sector, while the Utility sector (-1.7%) was the largest underperformer.

However, a stronger than expected Q3 New Zealand data print, the highest in 10 years, which sent bond yields in New Zealand and Australia sharply higher this morning, took the steam out of the rally in the ASX200.

As did a softer than expected Q3 GDP data in China (4.9% compared with a median forecast of 5%) on spill over from the Evergrande debt crisis and electricity shortages that crimped output.

Technically we continue to view the decline from the August 7632.8 high as a correction not a change of trend. However a break and close above trend channel resistance at 7400/20 is needed to indicate the correction is complete and the uptrend has resumed towards 7750 into year-end. 

Until then a retest of the support provided by the September 7145 low, reinforced by the 200 day moving average now at 7130 remains possible.

ASX200 Daily chart 18th of October

Source Tradingview. The figures stated areas of October 18th, 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

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