The ASX 200 Index continued its strong rally this month. It has jumped in the past four consecutive months, reaching a record high of A$8,776, up by over 22% from the lowest level in April.
Australia inflation and RBA decision
The ASX 200 Index continued its strong rally after Australia published the latest consumer price index (CPI) data on Wednesday.
This report showed that the headline consumer inflation rose 0.7% in the second quarter and 2.1% annually. The CPI has been in a strong downtrend after peaking at 7.8% after the COVID-19 pandemic and is now hovering near the lowest level since the March 2021 quarter.
This annual inflation figure moved to 2.1%, down from 2.4% in the first quarter as it continues to near the RBA’s target of 2.0%. This inflation dropped because of a sharp decline in automotive fuel prices, but was offset by an increase in food inflation.
Additional inflation data revealed that the weighted mean CPI decreased from 2.9% in Q1 to 2.7% in Q2, while the trimmed mean figure also dropped to 2.7%. These numbers are important because they trim the most volatile items. In a statement, a Bloomberg analyst said:
“In our view the latest inflation reading points to the RBA continuing with a gradual pace of easing. We expect 25-bp rate cuts in August and November, with further easing to follow in 2026.”
Australia stocks and bonds
The ASX 200 Index jumped due to rising hopes that the RBA will cut interest rates at its upcoming August meeting. Rate cuts incentivize more people to invest in the stock market as the bond market returns fall.
Data shows that Australian 10-year bond yields dropped to 4.271%, down from this month’s high of 4.440%. It has moved from last year’s high of 4.72% as interest rates have fallen.
Most Australian stocks rose in the green this week. The Pilbara Minerals share price jumped by 5.52% on Wednesday, while banks like Commonwealth Bank of Australia (CBA), Westpac Banking, Bank of Queensland, and National Australian Bank (NAB) jumped by over 2%.
The next key catalyst for the ASX 200 Index will be the upcoming Federal Reserve interest rate decision. Economists believe that the bank will leave interest rates unchanged.
ASX 200 Index technical analysis
ASX 200 Index chart | Source: TradingView
The daily chart shows that the ASX 200 Index has been in a strong bull run in the past few months. It moved from a low of A$7,145 in April to the all-time high of A$8,768.
The index has moved above the important resistance level at A$8,623, the highest swing on February 25. It has moved above the 50-day and 200-day Exponential Moving Averages (EMA).
The Relative Strength Index (RSI) and the Stochastic Oscillator have all pointed upwards. It has also moved to the ultimate resistance of the Murrey Math Lines at $8,750.
The potential target of the ASX 200 Index will be the extreme overshoot point at A$9,062, up by 3.8% from the current level. A move below the support at A$8,623 will invalidate the bullish view.
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