Stronger wages data unable to boost the ASX200 after soft CBA trading update

Over the past week and a half, the intraday volatility in the ASX200 has reminded of a caged animal. Its behaviour becoming increasingly frenetic in its attempts to break the confines of a well-established range.

Australia

After failing to break the top of the range yesterday, despite RBA communique that offered the best of both worlds (optimistic on growth yet pessimistic on the prospect of rate hikes before 2024), the ASX200 is eyeing the downside today following a soft trading update from Commonwealth Bank of Australia (CBA).

While CBA's cash profits rose to $2.2 billion in the three months to September, the bank's profitability as measured by the Net Interest Margin (NIM) was "considerably lower" due to intense competition in the mortgage space.

In response, the share price of CBA has fallen 6.20%, to be trading near $101.00, shaving a whopping 30 points of the index. The share price of the other big four banks are also trading lower in sympathy.

Offering little in the way of assistance for the index, the release of stronger than expected Australian Q3 wages data to 0.6% q/q, the highest reading since the first quarter of 2020, taking the annual pace of growth to 2.2%. Still well short of the 3-3.5% range needed to help inflation return sustainably within the RBA's 2-3% target band.

Where to now for the ASX200?

The chart below shows that the ASX200 has been capped late by the seemingly impenetrable layer of horizontal resistance at 7480/88. On the downside, the index has uptrend support at 7330, coming from the October 2020, 5779 low, reinforced by the early November 7311 quadruple low.

For the bullish bias to remain and expectations of a retest and break of the August 7632 high, the ASX200 needs to hold above support and recent range lows at 7330/10 and then break and close above 7480/88.

Aware that a failure to hold support at 7330/10 would likely see the ASX200 undertake a deeper pullback, initially towards support in the 7200/7150 band coming from the 200-day moving average and the September 7145 low.

ASX200 Daily Chart 17th of November

Source Tradingview. The figures stated areas of November 17th, 2021. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

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