In a week filled with interest rate hikes and recession talks, the Australian 200 index (ASX: S&P/ASX 200) lost 1.22% as the sentiment around the equity market soured. With interest rate hikes domestically and in the US and Europe, the market flipped the risk switch and fled toward safer assets. Heading into the new week, the index will look to rebound, backed by a strong NFP report in the US on Friday. 

Traders experienced some relief as the Non-Farm Payrolls came in well above expectations at 253K, signalling a resilient US economy. The equity market recovered from the selloff, with the Australian 200 index rebounding off crucial support in an attempt to pare the weekly losses. Heading into the new week, Australia is due to deliver its Retail Sales and Westpac Consumer Confidence Index on Tuesday as the first potential drivers of the price action. 

Technical 

On the 4H chart, the index hit psychological resistance at 7,377.00 as the April rally peaked. Since then, the market has started the retracement process in a symmetrical triangle. The Fibonacci midpoint at 7,140.6 underwent a brief test before the bears retreated toward the 23.6% retracement at 7,268.20.  

If the domestic data releases show confidence in the state of the economy, the risk-on sentiment could aid the bulls in pushing toward the triangle resistance at 7,326.40, where a bullish breakout could trigger a retest of the psychological resistance. If the bulls finally overcome this resistance at 7,377.00, they could be in for additional upside toward 7,410.80 and 7,565.70. 

However, with traders remaining cautious over the recession potential, adverse data reports could catalyse more considerable downside moves in a continuation of the retracement. A test of the triangle support at the 38.20% Fibonacci retracement at 7,197.60 could lead to a breakdown to retest the midpoint of 7,140.6 before reaching new support at the Fibonacci golden ratio of 61.8% at 7,083.50. 

Summary 

After a challenging week, the Australian 200 index will look to follow the trend of economic resilience to rebound out of the symmetrical triangle toward psychological resistance at 7,377.00. However, if the releases tomorrow sour the sentiment, the bears could come out of their dormant state to break down the triangle consolidation toward 7,140.60. 

Sources: Koyfin, Tradingview