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By Stuart McPhee

Australia 200 for Monday, June 30, 2014

Yet again the Australia 200 Index is currently doing its best to rally higher and push back towards the resistance and key level at 5500, although in the early stages of this week it is falling back towards 5400 again. It has been relying upon support at the 5400 level yet again after falling sharply back in the few days at the start of last week. Over the last few 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.

Borrowers can rest easy as it looks like the Reserve Bank's cash rate will not go up for the remainder of the year. All 16 market economists surveyed by AAP say the RBA won't move the cash rate at its board meeting on Tuesday, and only two say there will be a rate rise before Christmas. Seven are predicting a hike in the first half of 2015, which would be the first interest rate rise in over four years. St George chief economist Besa Deda recently moved her forecast for the next rate hike from end of 2014 to the first quarter of 2015. "Inflation has moved in the upper part of the Reserve Bank's target band and economic growth has improved since turning a corner around September of last year," she said. "However, the concerns about the outlook suggest the start of the rate-hike cycle is still some time away." Central banks raise their interest rates to keep inflation from getting too high, and cut the rate to help stimulate economic growth. The Australian economy is still in recovery mode and will need more time to adjust to the decline in mining investment that has been at all time highs in recent years, Ms Deda said.

(Daily chart below)

Australia 200 June 30 at 00:35 GMT 5471 H: 5471 L: 5471

Australia 200 Technical

S3S2S1R1R2R3
5400530050005550--

During the hours of the Asian trading session on Monday, the Australia 200 Index is looking to rally back higher and continue its push back to the resistance level at 5500, however it is falling presently and struggling. 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

  • 01:30 AU Private Sector Credit (May)
  • 05:00 JP Housing starts (May)
  • 06:00 JP Construction orders (May)
  • 08:00 EU M3 Money Supply (May)
  • 08:30 UK BoE - Mortgage Approvals (May)
  • 08:30 UK BoE - Net Consumer Credit (May)
  • 08:30 UK BoE - Secured Lending (May)
  • 08:30 UK M4 Money Supply (May)
  • 09:00 EU Flash HICP (Jun)
  • 12:30 CA GDP (Apr)
  • 13:45 US Chicago PMI (Jun)
  • 14:00 US Pending Home Sales (May)

*All release times are GMT

Source: Australia 200 - Looks To Return To Resistance At 5500