RBA preview and what comes next for the ASX200?

At its last scheduled monetary policy meeting for 2021, the RBA tomorrow will likely keep interest rates on hold at 0.1% and reiterate that interest rates are unlikely to rise until inflation is sustainably back within its target band.

Australia

As such, most interest will be in the Board's commentary around the stronger than expected Q3 GDP print and discussions around potential disruption to the outlook from the Omicron variant and high inflation.

While the Australian interest rate market remains priced for rates “lift-off” by mid-2022 and has almost three rate hikes priced before the end of 2022, tomorrow's RBA meeting isn’t likely to provide much gratification for overly eager bond traders.

Turning now to the ASX200, a hawkish Fed pivot, high inflation, and the latest Covid-19 variant, Omicron, have created an unstable mix of growth and policy tightening concerns for Australian equity investors. In response, the ASX200 closed lower last week, for a fourth straight week.

For traders that have come to expect the ever-reliable Christmas rally, more information around Omicron's transmission rates, the efficacy rate of existing vaccines, and the virus's severity are first needed before the rally can take hold.

Presuming research confirms early reports that Omicron is more transmissible but results in milder cases, the ASX200 will likely springboard higher from the 200-day moving average at 7230, where it is attempting to base and retest the August 7632 high. 

Until then, the market remains susceptible to headlines. A retest of the September 7145 low is possible with scope towards wave equality and psychological support at 7000 before the correction is complete.

ASX200 Daily Chart 6th of Dec

Source Tradingview. The figures stated areas of December 6th, 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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