ASX 200 Market Outlook: CBA Holds Firm as Banks Attempt to Stabilise

The ASX 200 extended its rebound on Thursday as buyers defended key technical support, led by tentative stabilisation across Australia’s big four banks. While inflation remains above the RBA’s target band and valuation concerns linger for the banking sector, reduced volatility — particularly in CBA — has helped steady the broader index. With momentum improving but volume still subdued, traders are now watching whether the recovery can extend towards resistance near 8,800.

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ASX 200 Outlook: CBA Stability Supports a Tentative Market Rebound

ASX 200 Market Snapshot

• The Australian share market rose for a second day on Thursday, in line with yesterday’s near-term bullish bias
• 126 ASX 200 stocks advanced (63%), 61 declined (30.5%), while 13 were unchanged (6.5%)
• 10 of the 11 ASX 200 sectors advanced, led by Information Technology (XIJ), Health Care (XHJ) and Consumer Discretionary (XDJ)
• The ASX cash index rose 0.29%, recouping most of the losses from Tuesday’s bearish engulfing session, when Utilities and Financials led declines
• The Communication Services index (CTJ) formed a bullish engulfing candle above 1700, hinting at a near-term cycle low
• Industrials (XNJ) rose in line with the bullish bias, while ALS Ltd (ALQ) printed a record high after a decisive breakout above 22.50 resistance

Chart analysis by Matt Simpson - source: ASX, LSEG

CPI Fails to Save Australian Banks from Valuation Reset

Australian banking shares sold off sharply on Tuesday ahead of Wednesday’s CPI report. While inflation was not as bad as feared, both headline CPI and trimmed mean remain above the RBA’s 2–3% target band, keeping the risk of further rate hikes alive this year. That saw Australia’s ‘big four’ banks extend their sell-off on Wednesday following the release.

Sentiment was not helped by a bearish note from Morgan Stanley on Australian banks, with analysts expecting sector valuations to derate in 2026 as earlier expectations of rate cuts fade and current valuations look stretched.

I tend to agree and suspect Australian banks face a tough year ahead, which could ultimately support a firmer Australian dollar. That, in turn, points to a struggling ASX 200 that is likely to underperform Wall Street, unless markets see a genuine risk-off shock — in which case equities would be hit across the board anyway.

Big Four Banks Show Early Signs of Stabilisation

While Australian banking stocks are likely to face pressure as the year progresses, there are early signs of near-term stabilisation. Bearish volatility in CBA and NAB all but faded on Thursday, with both printing very narrow daily ranges. Westpac formed a small bullish inside day, while ANZ printed a modest bullish candle.

Given CBA is the largest ASX 200 stock by market capitalisation and remains above its 20-day EMA, it is one to watch today for a potential long setup. That could help the broader share market grind higher into the weekend, having already bounced from support on Thursday.

Chart analysis by Matt Simpson - source: ASX, TradingView

ASX 200 Technical Analysis

The ASX rose for a third consecutive session on Thursday, in line with my bullish bias. Support has been found around the monthly pivot point, alongside the 20-day and 50-day EMAs. The daily RSI (14) is curling higher from the 50 level, signalling improving momentum and confirming the move without flashing overbought conditions.

What bulls are still lacking, however, is convincing volume, which remains subdued — likely a function of seasonal conditions.

Even so, the ASX 200 retains scope to grind higher in the near term, with 8,800 now in focus near the monthly R1 pivot and the November VPOC.

Chart analysis by Matt Simpson - Source: TradingView, ASX SPI 200 Index Futures

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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