ASX 200 Forecast: Aussie Equities Looking for Relief after Tough Start to September

ASX 200, Australian Economy, Reserve Bank of Australia, Iron Ore – Talking Points

• ASX rallies on Wednesday to halt recent slide, fundamental outlook remains dim
• AUD/USD weakness continues on weak Chinese data, potential for upcoming Fed taper
• Iron ore prices sink again, with futures contracts down nearly 50% from pandemic highs

Australian equities have mirrored their American counterparts by struggling during September. But at the midway point of the month, things may be turning for the better. Prices may find solace in recent comments from the Governor of the Reserve Bank of Australia (RBA), Philip Lowe. Lowe stated that the central bank will not raise the country’s cash rate until 2024, even if a hike would ease recent pricing pressures. While this stance was made public at the most recent RBA policy meeting, a myriad of headwinds has piled the pressure on Australian risk-assets.

S&P/ASX 200 Daily Chart

Chart created with TradingView

The ASX 200 pushed higher on Wednesday, but risks remain as the index looks to reverse the recent downtrend. With a weak fundamental outlook, technical factors also hint that the rally may be short-lived. For the second consecutive session, the ASX 200 traded up to its 50-day moving average, only for the test to be rejected. Resistance in the form of the 50-day moving average and the 0.382 Fibonacci retracement at 7452 could prove to put the final nail in the coffin of this brief rally. A move lower could see support come into play at the 0.236 Fib retracement, which would allow time for both relative strength and the fundamental outlook to improve.

The Australian economic calendar is muted for the next seven days, with employment data the standout. A combination of weak Chinese economic data and Australian covid fears has limited near-term upside for the Aussie Dollar, as market participants digest significant headwinds. Retail sales and industrial production highlighted fears over China’s economic slowdown, with additional fear stemming from the potential regional fallout from the Evergrande debacle. Domestic Covid restrictions, as well as falling iron ore prices, also represent significant headwinds for Australian optimism.

Australian Economic Calendar

Courtesy of the DailyFX Economic Calendar

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— Written by Brendan Fagan, Intern

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