In response to underwhelming global manufacturing data, the Australian 200 index (ASX: S&P/ASX 200) gained traction, fostering the anticipation that central banks might refrain from further interest rate hikes. The S&P Global Services PMI in the US declined more than expected, from 52.3 to 51, while the S&P Global Manufacturing PMI descended deeper into contraction, slipping from 49 to 47. 

PMI data in the UK and Europe painted an equally unimpressive picture, with both the Composite and Services PMIs rearing from expansion to contraction in the UK and the Services PMI doing the same in Europe. Weaker-than-expected PMIs provided the index with some encouragement that central banks may not need to tighten further as restrictive interest rate settings are cooling economic activity and easing inflationary pressures. Nonetheless, the equity market’s attention is riveted on the upcoming remarks by US Federal Reserve Chair Jerome Powell at the Jackson Hole symposium, which could pave a path for the future of interest rates.  

Technical 

The Australian 200 index has been subjected to increased volatility on the 4H Chart. A downward trend encouraged the index to cushion at the 78.60% Fibonacci Retracement level, but a sharp rejection of this support bolstered the price action towards the 7,473.40 resistance. Since the ASX has been struggling to gain upside or downside traction, a move below the 7,021.50 level could support the occurrence of a leg down towards the 6,898.40 major support. In contrast, a move above the 7,473.40 resistance could bolster the index toward the 7,558.70 major resistance. 

Since the 50-day moving average is above the 100-day moving average, the price action could leg up towards the 7,252.90 resistance at the 38.20% Fibonacci level if a breakdown of the 50% level is sustained. However, the 50-day moving average may converge with the 100-day moving average, which could support the occurrence of a leg down towards the 7,021.50 resistance. 

Summary 

The Australian 200 index edged higher on the backdrop of woeful PMI data, shaping a dovish future for interest rate hikes. If the upward momentum continues, the price action may attempt to retest the 7,252.90 resistance. However, the 50% level could hold, supporting a leg down toward the 6,898.40 major support. 

Sources: TradingView