KEY POINTS:
- Australia inflation data in focus tomorrow
- The market is pricing 32% probability of a rate hike in February
- Total tightening expected in 2026 is around 42 bps
- ASX 200 is trading inside a rising channel
- Soft data is expected to trigger a rally, while hot figures will likely add more pressure
FUNDAMENTAL
OVERVIEW
The ASX 200 went into a meaningful
drawdown back in November following the hot inflation data at the end of October.
That triggered a hawkish repricing in interest rate expectations which were
then followed by a more hawkish RBA decision. The central bank even discussed
whether a rate hike might be needed at some point in 2026.
The market is pricing a 32%
probability of a rate hike at the upcoming meeting in February with a total of
43 bps of tightening seen by year-end. Tomorrow, we get the monthly Australian
inflation data. Even though the RBA focuses more on the quarterly reports,
traders will likely react to the monthly report.
Given the hawkish
expectations, a soft report will likely have a bigger impact on Australian
assets. In such a case, we will likely see the ASX 200 rallying as the hawkish
expectations fade. On the other hand, another hot report will likely weigh
further on the stock market, potentially taking it back to November lows.
ASX 200 TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On
the daily chart, we can see that
the ASX 200 (CFD contract) has been
trading inside a rising channel. From a risk management perspective, the buyers
will have a better risk to reward setup around the bottom trendline to position
for a rally into new all-time highs, while the sellers will look for a break
below the trendline to push the price back into the 8415 level.
ASX 200 TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On
the 4 hour chart, we can see that
we have a downward trendline defining the pullback into the lower bound of the
channel. If the price rallies into the downward trendline, we can expect the
sellers to lean on it with a defined risk above it to position for a drop into
the lower bound of the channel. The buyers, on the other hand, will want to see
the price breaking higher to increase the bullish bets into the upper bound of
the channel.
ASX 200 TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we can
see that we have a minor support zone around the 8670 level. The buyers will
likely continue to step in around this level with a defined risk below it to
keep targeting the downward trendline, while the sellers will wait for a break
lower to extend the drop into the bottom of the channel.
UPCOMING CATALYSTS
Tomorrow we have the Australian monthly inflation data, the US ADP, the US ISM
Services PMI and the US Job Openings data. On Thursday, we get the latest US
Jobless Claims figures. On Friday, we conclude the week with the US NFP report.
This article was written by Giuseppe Dellamotta at investinglive.com.