ASX 200 forms rounded top pattern as RBA rate hikes bet remain

Australian stocks drifted upwards on Tuesday even after the country published weak wage growth data. The ASX 200 index jumped by 0.25% even after its Wall Street counterparts like the Dow Jones shed over 700 points. It was trading at $7,310, a few points above its lowest point this year.

Australian wage growth crashes

The Australian labor market remains firm, with the unemployment rate sitting near its lowest level in more than 50 years. However, wages are not doing well if the latest data by the bureau of statistics is to go by. 

The data revealed that the wage price index rose by 0.8% QoQ on the first quarter after growing by 1.0% in the previous quarter. This decline was worse than the median estimate of 1.0%. Wages rose by 3.3% from a year earlier, worse than the expected 3.5%.

Further data showed that construction work done dropped by 0.4% after expanding by 2.2% in Q3. The RBA is paying a closer attention to wages, as I wrote in this article. 

Still, analysts believe that the central bank will maintain its hawkish tone in the coming meetings. Minutes published on Tuesday revealed that the committee was still concerned about inflation, which stands at over 7%.

The latest wage growth data came a week after the bureau published weak jobs numbers. These numbers revealed that the Australian unemployment rate rose to 3.7% as the country lost thousands of jobs. In a note, analysts at NAB said:

“With the RBA having re-assessed the extent of domestic inflationary pressures, NAB continues to see the RBA raising rates by 25 basis points at March, April and May to take the cash rate to 4.1 percent by May, where following that there is a strong case for a pause.”

ASX 200 index forecast

ASX 200 chart by TradingView

The S&P/ASX 200 index has formed a unique pattern on the four-hour chart. It has formed an inverted rounded bottom or rounded top pattern, which is usually a sign of a bearish continuation. Along the way, it has also crashed below the 50-day moving average while the Relative Strength Index (RSI) has moved below the neutral point at 50.

The index has also dropped below the support at $7,376, the highest level on December 1. Therefore, the outlook of the ASX 200 index remains bearish, with the next reference level to watch being the psychological level of $7,200.