The ASX 200 Index held steady on Tuesday after the latest Reserve Bank of Australia (RBA) interest rate decision on Tuesday morning. It was trading at $8,885, up from this month’s low of $8,720. It remains up by over 25% from the lowest level this year.
RBA interest rate decision
The main catalyst for the ASX 200 Index was the RBA interest rate decision. As expected, the bank left interest rates unchanged at 3.6%.
Recent economic data showed that Australia’s inflation continued to fall but remained above the target of 2.0%. The trimmed mean inflation dropped to 2.7% in the second quarter from the pandemic high of 6.8%.
The headline CPI, which looks at the changes in prices of most items, dropped to 2.1% from the previous 2.4% and from the pandemic high of 3.8%. In its statement, the bank said:
“The Board judged that it was appropriate to remain cautious, updating its view of the outlook as the data evolve. It remains alert to the heightened level of uncertainty about the outlook. It noted that monetary policy is well placed to respond decisively to international developments if they were to have material implications for activity and inflation in Australia.”
Economists expect that the central bank will cut interest rates in the coming months to support the economy. It will join other central banks like the Federal Reserve and the ECB that have delivered cuts this year.
Gold prices have boosted Australian stocks
The ASX 200 Index has moved upwards in the past few months, helped by the hopes that the RBA will deliver more interest rate cuts this year.
Also, the index has benefited from the ongoing performance in gold prices. Gold jumped to a record high of over $3,800 this year, bringing the year-to-date gains to over 45%.
As a result, some of the best ASX 200 Index companies this year are in the gold industry. Regis Resources’ stock rose by 202%, while Emerald Resources’ has soared by over 30%.
Ramelius Resources’ stock price jumped by 78%, while Capricorn Metals soared by 128%. The other notable gainers in the index were companies like Genesis Minerals, Perseus Mining, Newmont, and Evolution Mining.
These gold mining stocks will likely continue doing well this year as gold prices soar. Gold has jumped because of the ongoing institutional demand, Federal Reserve interest rate cuts, and retail demand.
Australian bank stocks have also done well this year. Commonwealth Bank, National Australia Bank (NAB), Westpac, and ANZ Bank have jumped by 25%, 18%, 24%, and 9%.
ASX 200 Index technical analysis
ASX Index chart | Source: TradingView
The daily timeframe chart shows that the ASX 200 Index has jumped from a low of $7,134 in April to the current $8,856. It has remained above the 50-day and 100-day Exponential Moving Averages (EMA).
The index has formed a double-bottom pattern at $8,720. This is one of the most common bullish reversal patterns in technical analysis.
Therefore, the ASX Index will likely continue rising as bulls target the important resistance at $9,000. A move below the support at $8,720 will invalidate the bullish outlook.
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