ASX 200 testing 8600 with RBA risk looming

• RBA tightening into soft growth is capping upside
• No tech or AI tailwind, leaving index without a growth driver
• Bank and miners under pressure from weak updates and external risks

The ASX 200 has struggled to generate upside lately, held back by a mix of structural and macro headwinds. A still-hawkish RBA is trying to slow demand to contain inflation, tightening conditions as parts of the economy already look soft, while the index lacks any meaningful tech or AI tailwind seen in other Asian markets.

At the same time, its heavy weighting to financials and materials is working against it. Disruptions around the Strait of Hormuz are clouding the outlook for global growth and commodities, while recent bank updates have disappointed, with Westpac the latest, reinforcing concerns around margins and earnings.

It helps explain why the index keeps gravitating back towards the bottom of its recent range.

ASX 200 Setups

Source: TradingView

Our ASX 200 contract has returned to the bottom of the prevailing sideways trading range it has been in since the latter parts of April, providing a level where several trade setups can be built depending on how the near-term price action evolves.

8600 is the immediate downside level to focus on, having acted as resistance in late March before flipping to support over the past week. Should the price retest and bounce from the level again, longs could be set above with a tight stop below, targeting the confluence of the 50, 100 and 200-day moving averages initially starting at 8772.9. If the price were to push above 8800, the obvious target overhead would be 8900 which previously acted as support, with 9040 another resistance zone where the index stalled on several occasions back in early April.

How the price interacts with the moving average zone, should it get there, may provide insight on whether to hold, cut or reverse the long position.

Alternatively, if the price were to break and hold beneath 8600, the setup could be flipped with shorts set on the break with a stop above, targeting the swing low of 8254 set on March 20. Some support may be encountered around 8400, so keep an eye on price action in that vicinity if the trade starts to work in your favour.

The message from the oscillators marginally favours selling into strength, although neither RSI (14) nor MACD suggests bears are in complete control. In a headline-driven market such as this one, price action may be more informative than where the prevailing momentum is shifting.

For anyone trading the index today, the RBA rate decision will be in focus, and likely have an impact on its performance depending on which way the bank decides to go, along with its messaging regarding the policy outlook.

While I think the cash rate will increase today, I suspect the updated forecasts, statement tone and vote, which is likely to be a split decision, may struggle to live up to the three full hikes swaps markets have priced in by March 2027. If that eventuates, it may act as a release valve for the broader index, tilting directional risks higher near-term.