ASX 200 Underperforms – RBA Keep Rates at 0.25%

Summary:

ASX 200 index extend loses for third consecutive session underperforming it’s Asian peers, after a mixed session in Wall Street and a gloomy day in Europe.

ASX 200 index extend loses for third consecutive session underperforming it’s Asian peers, after a mixed session in Wall Street and a gloomy day in Europe. Despite the losses in the last days ASX managed to end 2.20% higher in August, marking the fifth consecutive month of gains.

RBA Keeps Rates Unchanged at 0.25%

Reserve Bank of Australia left the interest rates unchanged at 0.25% – record low levels – as was expected by markets. The central bank said that there is no need for monetary or fiscal measures and that the cash rate will be at current levels for the next three years. The Aussie economy shrank to levels we haven’t seen since 1930. The contraction is slightly better than the initial forecasts, but the recovery would be a bumpy process. RBA reiterated that would use all tools available to support the jobs and businesses. RBA extended the Term Funding Facility, which boosts the supply of credit to businesses and households.

Home prices in Australia drop by 0.4% in August. Melbourne home values fell by 1.2% amid the new coronavirus restrictions. The Building Permits increase by 12% in July, beating the expectations of -2%, the yearly Building Permits reading increased to 6.3% in July from -15.8% in June.

Australian Manufacturing Sector Disappoints

The Manufacturing sector continues to disappoint. The Commonwealth Bank Manufacturing PMI registered in at 53.6 in August below the estimates of 53.9. The AiG Performance of Manufacturing Index dropped to 49.3 in August from 53.5 in July.

ASX 200 Analysis

ASX 200 started September 1.77% lower at 5,953 making fresh monthly lows. Now the technical picture has deteriorated, and bears took control as the index breached the 50-day moving average support. The move today point to further loses.

Support for ASX 200 index stands at 5,908 the daily low. The next support would be met at 8,864 the low from August 3. The index will enter the bearish market if it breaks below the 100-day moving average at 5,607.

On the upside, the first hurdle is at 6,029 the 50-day moving average which now has turned into resistance. A break above would meet selling pressure at 6,133 the 200-day moving average.