ASX 200 at Crossroads: China Rout’s Effect on All-Time High

The AUD and ASX 200 are at a crossroads as Chinese sentiment worsens. The RBA decision, NFP data, and China’s market fluctuations impact the markets.

The Australian Dollar (AUD) and the ASX 200 experienced downward pressure as Chinese sentiment worsened. The ASX 200 pulled back from its all-time high reached on Friday.

Minimal Expectations from the RBA Tomorrow as Inflation Stabilizes

The Reserve Bank of Australia (RBA) is expected to maintain the benchmark lending rate at 4.35% in its upcoming decision, reflecting easing pressure for further interest rate hikes. Positive signs in incoming inflation data have contributed to this shift in expectations. The RBA had previously raised rates in November due to unfavorable inflation data. Market speculation suggests a possible interest rate cut by September, with a 49% chance of it occurring as early as June, according to market implied probability.

ASX 200 at Crossroads: China Rout’s Effect on All-Time High

AUD/USD Under Pressure Post-NFP

The Australian Dollar (AUD) faced additional downward pressure following a positive surprise in the US job market, particularly with substantial January numbers and a significant upward revision in December figures. A bear flag has emerged around the 200-day simple moving average (SMA), confirmed by a substantial move to the downside on Friday. The AUD/USD pair tests a narrow range of support, with a potential downside toward 0.6460. The upcoming RBA decision and the US ISM services PMI data pose potential risks for the pair.

ASX Pulls Back from All-Time High After China Rout

The ASX 200 retreated from its all-time high, reaching 7641 on Friday, amid negative sentiment from China. A daily selloff in Australian stocks was observed, driven by robust jobs data in the US, strengthening the US dollar. Over the weekend, the Chinese securities regulator vowed to prevent abnormal market fluctuations without providing specific details. Concerns about ill-intentioned short selling persist, with the regulator having previously banned short selling and restricted security lending two weeks ago to curb the decline in the local stock market.

Despite signs of fatigue around the all-time high, the ASX 200’s uptrend remains intact since last month’s swing low. Bears face the challenge of a daily close below 7645, with the January swing low as the next significant level of interest for index traders. However, bulls may not capitulate easily, and a retest of the all-time high remains a possibility without further selling.

Investors and traders are advised to remain vigilant in navigating these uncertain market conditions. Further developments in Chinese sentiment could impact Australian assets.

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