ASX200 closing in on 12 month high despite RBA caution on housing

At this afternoon's RBA Board meeting the RBA as expected, kept its key monetary policy settings unchanged including the target of 10 basis points for the cash rate and the yield on the 3-year Australian Government bond, as well as the parameters of its bond purchase program.

Australia

The RBA reiterated that it does not expect to raise interest rates until inflation returns to within the 2-3% target band for a sustainable period, as well as the need for a stronger labour market and higher wages growth. Conditions that it estimates are unlikely to be achieved until 2024 at the earliest.

There was some speculation in the lead-up to today's meeting that the RBA might intensify its commentary surrounding the booming Australian housing market. This proved to be spot on as the RBA sounded a warning note on lending standards in the paragraph below.

“Given the environment of rising housing prices and low-interest rates, the Bank will be monitoring trends in housing borrowing carefully and it is important that lending standards are maintained.”

Despite this, following a strong overnight lead from offshore equity markets, including a third straight session of NASDAQ outperformance as alluded to last week here, the ASX200 has enjoyed its best day since early March, to be trading at 6896.50, +67.80pts or 0.99% at the time of writing.

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Technically, today's break above the band of resistance coming from the four highs in March near 6860ish is a positive development that has the ASX200 within one good session of testing the February 2021, 6938 high. A break above 6938ish would then allow the ASX200 to extend its rally towards the top of the trend channel, currently near 7050.

On the downside, near-term support at 6860/40 should hold to keep today’s short-term break higher intact. To keep the medium-term bullish bias in place, the ASX200 has no right closing below trendline support 6710/00ish.

ASX200 closing in on 12 month high despite RBA caution on housing

Source Tradingview. The figures stated areas of the 6th of April 2021. 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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