Following the release of the RBA’s meeting minutes concerning their March meeting, the Australian 200 index futures (ASX: S&P/ASX200) experienced a minor retracement in the prior week’s selloff. With a rate hike pause in sight, the equity market breathed a sigh of relief as the banking sector fears started to ease. However, the risk remains with the US Federal Reserve due to deliver their interest rate decision on Wednesday. 

The Westpac Leading Index for Australia contracted by 0.06% compared to the 0.12% contraction last month. The economy is recovering, with risk sentiment being the likely driver for the week, as limited economic data is due for the Australian economy. Still, the US interest rate decision could affect the market’s risk sentiment as we advance, which could spill over into the Australian market. 

Technical 

A breakout from the head and shoulders pattern invited the bears to enjoy some downside momentum toward 6897.2. However, the bulls quickly pounced on the improved sentiment, with a retracement toward 7015.6. With the risk sentiment turning positive, the bulls could force more upside toward the 38.20% Fibonacci retracement at 7078.6. The interest rate decision could directly affect the market’s sentiment. Therefore, a dovish outlook could entice the bulls to look for the 61.8% golden ratio retracement at 7190.6. 

On the other hand, if the Fed remains hawkish in its outlook for the future, the bullish run could be halted, which could see a reversal back to 7009.3 and 6897.2. 

Summary 

With the RBA leaning towards a rate hike pause in their next meeting, a risk-on sentiment is drawing traders into the equity market. However, the US Fed’s decision could affect this sentiment. If the risk-on remains, the futures could target the 61.8% Fibonacci retracement toward 7190.6 in the upcoming week. 

Sources: Koyfin, Tradingview