Australia 200

Signs of fatigue have surfaced across several key markets which had otherwise began the week on a strong footing. And that could see gold and the ASX 200 retrace further from their cycle highs.

Tuesday looms as a potential make-or-break session for Australia’s ASX 200 with futures sitting at a key technical level on the charts ahead of the RBA interest rate decision. One saving grace may be the continued rebound in iron ore futures in Singapore.

Two very different indices, two similar trading setups. Will traders be willing to continue chasing record highs next week? The unconvincing price action to end the week warns of downside risks.

Despite lacklustre corporate earnings and rebound in US bond yields, the spectacular rally in AUD/USD and Australia’s ASX 200 only gathered pace in the second half of Thursday’s trading session, leaving both markets eyeing off potential topside breaks.

Australia’s labour market is undeniably slowing, bringing the prospect of the Reserve Bank of Australia (RBA) leapfrogging the US Federal Reserve when it comes to which central bank will cut interest rates first.

I’m particularly keen to see if the significant loss of full-time jobs is seen for a second consecutive month in tomorrow's Australian employment report. So today we look at how the ASX 200 and AUD/USD have performed around this key economic data release.

Having been a major benefactor from the soft-landing narrative, the combination of higher global interest rates and stretched valuations has Australia’s ASX 200 index under pressure.

US two-year Treasury yields are at risk of breaking back into the higher range they traded in prior to the Federal Reserve’s policy pivot last year, creating opportunities in markets sensitive to shifts in US rate expectations such as Australia’s ASX 200, USD/JPY and gold.

Australia’s ASX 200 is on track to close at levels not seen since February. Entering what’s traditionally been a strong period over the past two decades, the combination of seasonality and bullish technicals may see the index retest the highs hit in February.

This preemptive dovish signal arrived far sooner than many market participants expected, reducing the risk the global economy may experience a hard economic landing next year. For cyclicals such as the ASX 200 and crude oil, this is good news.

The question now for AUD/USD and ASX 200 is whether the tone truly reflects what the RBA is thinking, or will we see a repeat of recent months where subsequent commentary has been far more hawkish in nature?

We're on the lookout for any hawkish undertone in today's RBA minutes - given the RBA's statement was deemed to be less hawkish than expected. Failure to do so could see AUD/USD hand back some of it's gains. The Nasdaq is also following its seasonaly tendency to rise into Thanksgiving.

With a bullish engulfing week and day for AUD/USD on Friday, can the Aussie muster up the strength for a breakout above key resistance? And if losses on USD/CNH are anything to go by, perhaps USD/JPY is preparing to follow suit.

Hopes that the Fed have reached their terminal rate were revived with a softer-than-expected US inflation report. Earlier comments from Fed officials (namely Powell) had rekindled concerns that the Fed may have another hike up their sleeve, yet with CPI and core CPI reads all undershooting consensus estimates, risk-on returned in a big way.

WTI crude oil rose for a second day after the monthly OPEC report played down demand concerns and blamed speculators for oil's recent decline. A move to $80 at a minimum or $83 could now be on the cards. We also have a near-term bullish bias on the ASX 200.

The S&P 500 continues to defy gravity and appears on the cup of breaking above a key resistance level. And whilst AUD/USD fell for five days last week, it is fast approaching a key support level that has been favourable to dip buyers in recent times.

WTI fell over 4% to a 4-month low on Tuesday after slicing through $80. AUD/USD was also the weakest FX major after the RBA's statement lacked the level of hawkishness traders were seemingly positioned for.