The XJO is expected to open lower this morning following a strong pullback from the U.S last night. Their futures are flat this morning, which at least shows that their strong sell down last night isn’t being immediately met with further selling.

Our market yesterday was not expecting the RBA to raise rates. Lowe has pointed to strong job numbers and high inflation as the reason as to why they unexpectedly raised the cash rate 25 basis points. Our market broke the consolidation range lower following the announcement and is expected to continue the falls today.

We should test 7,200 today which has been a strong level historically but a minor one recently. We consolidated along 7,200 back at the start of April before legging higher again. This is also where the 50 MA comes in, which should help give some stickiness to our market around here.

From here it is certainly hard to predict where markets are heading. With the U.S interest rate decision tomorrow morning markets could go either way.

US Markets

US shares continued their reversal pattern overnight, with prices falling from the recent highs. Investors remain worried about the issues plaguing small and medium US banks, especially with another interest rate rise expected from the US Federal Reserve tonight. In addition, the US government is rapidly approaching their debt ceiling, with the limit potentially being reached by the 1st of June. Company earnings reporting has so far been strong enough for prices to hold their levels, but investors memories for these sort of things can be short. In economic data overnight, job openings and factory orders were each worse than expected, which wouldn’t help sentiment.

Discretionary was the only major US sector to close in the green overnight, while ever other sector fell. Energy stocks got annihilated, with the sector falling over four percent.

The SP500 fell off overnight and completed the reversal pattern after holding below the 4,160-resistance level. The index should now continue lower to the recent support around 4,070. Should we push back up and break above 4,160 however, we will likely see the index continue higher to 4,200.

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