ASX 200 index forecast as REA Group, ANZ, Westpac share prices jump

The ASX 200 index rally gained steam on Wednesday as the market reacted to the latest Australia inflation data. The index, which tracks the blue-chip Australian stocks, rose to $7,440, the highest level in over five months. It has surged by more than 6% from the lowest level this month.

Australian stocks jump

The S&P/ASX 200 index continued its rally on Wednesday as the market reflected on the encouraging inflation data. As I wrote here, Australia’s inflation dropped from 1.4% in Q1 to 0.8% in Q2. It stood at 5.4% on a year-on-year basis, the lowest level in months. 

The trimmed mean consumer price index (CPI) dropped from 6.6% to 5.9% while the weighted mean CPI fell from 5.50% to 5.40%. The two inflation figures strip the most volatile parts of inflation.

Therefore, analysts believe that the Reserve Bank of Australia (RBA) has room to be flexible in the coming months. This could include a situation where it leaves rates unchanged in its August meeting. The futures market lowered the chance of a rate hike next week from 54% to 29%. In a note, an analyst at EY said:

“Services inflation rose to an annual pace of 6.3 per cent, from 6.1 per cent in the year to the March quarter – with sharply higher prices for rents, restaurant meals, holiday travel and insurance over the past year.”

There were several important ASX 200 index movers. REA Group share price jumped to a 52-week high as the housing market remained strong. Australia mining stocks like Rio Tinto, Fortescue Metals, BHP Group, and Chalice Mining rose by more than 2%.

Bank stocks were also positive for the day as National Australian Bank (NAB), ANZ, Westpac, and Commonwealth Bank of Australia (CBA) jumped by over 1%. 

ASX 200 index forecast

ASX 200 chart by TradingView

The daily chart shows that the ASX 200 index has been in a strong bullish trend in the past few days. As it rose, it moved above the important resistance level at $7,392, the highest point on June 20th and April 17th. The index has jumped above the 25-day and 50-day moving averages.

At the same time, the Relative Strength Index (RSI) has pointed upwards. Therefore, the S&P/ASX 200 index will likely continue rising as buyers target the next key level at $7,604. A move below the support at $7,300 will invalidate the bullish view.