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.

The RBA continues to see the risk that rates may increase again despite delivering updated forecasts showing faster progress in bringing inflation back to within its target band. For AUD/USD traders, there was more interest in the rally in Chinese stocks and currency than what the bank had to say.

Australian overnight index swaps (OIS) markets are fully priced for the Reserve Bank of Australia (RBA) to cut its overnight cash rate by 25 basis points in June to 4.1%, adding pressure on AUD/USD following the release of a softer-than-expected Australian consumer price inflation (CPI) report on Wednesday.

AUD/USD and the ASX 200 have ignored a larger-than-expected slump in Australian retail sales in December, adding to earlier gains in the wake of the release.