Australia 200 Moves Up Strongly From Support At 5400

Includes: CROC, EWA, FXA, GDAY
by: Dean Popplewell

By Stuart McPhee

Australia 200 for Friday, June 20, 2014

Over the last couple of weeks the Australian 200 Index has slowly fallen back and broken back down through the key 5500 level towards a four-week low around 5400 where it has found some support over recent days before moving well yesterday to back within reach of the 5500 level again. It moved lower strongly to finish out last week and will now look at the support level at 5400 to provide some assistance in moving it back to the key 5500 level. In the couple of weeks prior 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 few weeks 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.

Record-low interest rates in Australia should be helping Reserve Bank governor Glenn Stevens guide the stubbornly high Australian dollar lower to help the local economy. However his aim is being frustrated by interest rates in the US that are even lower, with Federal Reserve boss Janet Yellen signalling they will remain low for a “considerable time”. The Aussie fell to a two-week low of 93.22 US cents on Tuesday after minutes of the RBA’s June board meeting showed it wants to keep the cash rate at a record low of 2.5 per cent “for some time yet”, and included a downbeat assessment on Australia’s economic growth prospects. But the dollar bounced back up through 94 US cents early Thursday morning after Dr Yellen wound up the Fed’s two-day policy meeting saying she would keep the federal funds rate steady despite a recent spike in inflation.

(Daily chart below)

Australia 200 June 20 at 00:15 GMT 5468 H: 5468 L: 5468

Australia 200 Technical

S3 S2 S1 R1 R2 R3
5400 5300 5000 5550

During the hours of the Asian trading session on Friday, the Australia 200 Index will be trying to hold on to its recent gains and continues its move back to the key 5500 level. 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.

Economic Releases

  • 08:00 EU Current Account (Apr)
  • 08:30 UK Public Borrowing (PSNB ex interventions) (May)
  • 12:30 CA CPI (May)
  • 12:30 CA Retail Sales (Apr)
  • 14:00 EU Flash Consumer Sentiment (Jun)

*All release times are GMT