ASX200 rides high the tailwinds of April ahead of RBA tomorrow

Australian flag

Looking to lock in a fourth straight week of gains, the strong season tailwinds that blow during the first half of April have helped the ASX200 add 21 points this morning to be trading at 7520.50.

Supported by the geopolitical disaster in Europe that has offshore investors hunting in packs for our Materials and Energy stocks, there is a sense of inevitability that the ASX200 will soon make fresh all-time highs.

Adding to the lustre of the local equity market, the prospect of higher interest rates has started to rub the shine from the Sydney and Melbourne property markets in recent weeks.

Bringing more colour to the interest rate picture, the RBA is due to meet tomorrow afternoon for its monthly board meeting.

As the RBA is expected to leave the cash rate unchanged at 0.1%, the real focus will be on any hawkish language that indicates the RBA is moving closer to hiking interest rates for the first time since 2010.

The RBA has previously stated that it needs to see a lift in wages growth for inflation to return “sustainably” within its target band. A scenario that seems unlikely until August.

Nonetheless, the Australian interest rate market is itching for the RBA to get started and is fully priced for an RBA interest rate hike in June and a total of 170 bp of hikes priced until the end of 2022.

Turning to the charts, today’s rally has the ASX200 eyeing weekly resistance at 7635/20 from the August 2021 high and the failed retest in early January.

While there will undoubtedly be sellers/profit taking ahead of this region, a break above should see the index make further gains towards 7750/7850, which would complete a five-wave Elliott Wave advance from the Covid Crash 4402 low.

ASX200 Weekly chart 4th of April 2022

Source Tradingview. The figures stated are as of April 4th 2022. 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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