Australia 200 for Thursday, June 26, 2014
The Australia 200 Index is currently doing its best to rally higher and push back towards the resistance and key level at 5500. It has been relying upon support at the 5400 level yet again after falling sharply back in the last few days. Over the last couple of weeks the Australian 200 Index has fallen and broken back down through the key 5500 level towards a four week low around 5400 before consolidating and rallying slightly higher. These two levels have firmly established themselves as significant and any substantial break to either side will most likely be a significant move and be closely monitored. It is quite likely many are sitting on the sidelines waiting for the break before committing as they continue to watch the index move between these two levels. A few weeks at the end of May, it moved back and forth between the two key levels of 5500 and 5550 before the recent fall.
Over the last couple of months the Australia 200 Index has formed an amazing attraction to the key 5500 level as it spent a considerable amount of time trading around it. A couple of weeks ago, the index fell away heavily back down to support around 5400 before returning to the key 5500 level just as quickly, as if gravity had pulled it back. Throughout the last couple of months it has been placing ongoing pressure on the resistance level at 5500 and a few weeks ago it was finally able to move through to a three week high before easing back again to this key level. Several weeks ago it slowly but surely eased away from its multi-year high achieved near 5560 however the following week it fell reasonably sharply and started looking towards the 5400 level which is near where it currently sits. In doing so it returned to back under the key 5500 level which has provided some reasonable resistance over the last few months.
For the bulk of the last few months, the Australia 200 Index has traded roughly between 5300 and 5500 therefore its return to back under 5500 was not surprising. The index has done well over the last couple of months to move steadily higher from support around 5300 up to beyond 5500, forming higher peaks and higher troughs along the way. The support level at 5300 may also be called upon should the index fall lower and will also likely play a role in providing some buffer from any decline. Since February, most of the trading activity has occured between 5400 and 5500 therefore the former level may also be called upon to prop up prices. The index has done very well over the last couple of years moving from below 4000 to its present trading levels around 5500.
The RBA probably won’t move interest rates after its policy meeting on Tuesday, but it could fire another shot in its war of words with the Australian dollar. In October last year, the exchange rate headed back up towards 97 US cents after dipping below 90 in both July and August. he central bank fired a warning shot, referring to it as “uncomfortably high”. The phrase was repeated in November and December but as the currency fell below 90 US cents again – dipping below 88 in late January – it was dropped after the RBA’s first monetary policy meeting of 2014 in February. “If sustained, a lower exchange rate would be expansionary for economic activity and assist in achieving balanced growth of the economy,” the RBA said in minutes of the February meeting. But it wasn’t sustained, leading the RBA to step up the rhetoric. By the policy meeting earlier this month the Aussie had been supported above 92 US cents for over two months and was looking strong. In the minutes of that meeting, the RBA again pointed accusingly to the exchange rate, which was “high by historical standards, particularly given the further decline in commodity prices over the past month”. And it repeated the warning that the exchange rate’s recovery from its February lows mean less of a boost to growth.
(Daily chart below)
Australia 200 June 26 at 01:55 GMT 5432 H: 5435 L: 5407
Australia 200 Technical
During the hours of the Asian trading session on Thursday, the Australia 200 Index is rallying back higher after threatening to break through the lower support level at 5400 in the last couple of days. For most of this year the Australia 200 Index has moved well from the lower support level at 5000 up to the multi-year highs above 5500 in the last month or so.
Further levels in both directions:
• Below: 5400, 5300 and 5000.
• Above: 5550.
- 12:30 US Core PCE Price Index (May)
- 12:30 US Initial Claims (21/06/2014)
- 12:30 US Personal income (May)
- 12:30 US Personal spending (May)
- EU European Council Meeting (to 27th)
- UK Financial Stability Report Published
*All release times are GMT
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