ASX 200 Market Outlook: Grinds Higher, but Momentum Still Fragile

The ASX 200 is attempting to stabilise after snapping a three-day losing streak, with price action holding near the 8600 options cluster. While a modest bounce is building, momentum remains fragile and heavily dependent on macro drivers. With the FOMC meeting looming, traders appear reluctant to commit, leaving the index grinding higher within a tight range rather than breaking into a sustained trend.

 

View related analysis:

• AUD/USD, EUR/AUD Outlook: RBA Hikes Again as Inflation Pressures Build
• US Dollar Outlook: FOMC Decision Meets Crude Oil Price Shock
• FX Futures Positioning: USD, EUR, GBP, JPY | COT report
• ASX 200 Outlook: ASX Holding December Lows as Bounce Setup Forms

 

ASX 200 Edges Higher, but Momentum Remains Fragile

ASX 200 Market Snapshot

• Momentum turned slightly higher on Tuesday, with the ASX 200 snapping a three-day losing streak despite the 25bp hike from the RBA
• SPI 200 (ASX 200 futures) were also higher overnight, suggesting bullish momentum is slowly building
• 6 of the 11 ASX sectors advanced, led by materials (XMJ) and real estate (XRE), while 5 declined, led by technology (XIJ) and consumer discretionary (XDJ)
• Commonwealth Bank (CBA), Westpac (WBC) and ANZ announced they will raise home loan rates by 25bp
• Macquarie (MQG) pulls back from Kuwait oil pipeline deal amid Iran tensions
• Xero (XRO) partners with Xendoo as demand rises from QuickBooks users
• BHP advances Chile copper expansion and begins approvals process
• CSL flags global supply shortage of key gene therapy treatment

 

Source: ASX, LSEG

 

ASX 200 Correlation Analysis

• Correlations show the ASX 200 remains tightly linked to materials and financials, with strong positive relationships across most timeframes — no surprise given their heavy index weighting
• Energy has flipped to a strong inverse correlation over the short term, suggesting oil’s surge is not translating into broader equity support (yet)
• US indices (S&P 500, Nasdaq, Dow) are highly correlated on a 20-day basis, reinforcing that Wall Street remains the key directional driver for the ASX
• The sharp inverse correlation with bonds (3yr) highlights rates as a dominant macro force — higher yields continue to weigh on equities
• Short-term (3-day) correlations are unstable, with some extreme readings (0.96), signalling choppy, event-driven conditions rather than a clean trend

The ASX 200 is still trading as a macro proxy — led by global equities, sensitive to yields, and increasingly disconnected from energy.

Source: ASX, ASX24, TradingView

 

 

 

ASX 200 Technical Analysis

The ASX 200 continues to show potential for at least a minor bounce, though traders may want to remain nimble as daily ranges are currently subdued heading into the FOMC meeting.

• The ASX daily cash market (left) shows prices remain anchored to the 8600 options cluster, while the small bullish candle hints at a near-term swing low
• The SPI 200 futures (middle chart) show the combined cash and overnight session closed with a bullish upside day, again suggesting the market is trying to grind higher
• The 1-hour chart (right) shows the market is effectively ranging between 8450–8600, with prices drifting higher within the range. The 1-hour RSI (2) reached oversold to hint at a swing low, so bulls may gain traction early in the session. Without a fresh catalyst, bears may be lurking around yesterday’s highs, leaving the ASX at risk of rolling back into the range unless a breakout occurs

 

Source: ASX, ASX24, TradingView

 

 

View the full economic calendar

 

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge