Australia 200 Struggling Near 2-Month Lows Below 5200

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Includes: AUSE, EWA, FAUS, QAUS
by: Dean Popplewell

By Stuart McPhee

Australia 200 for Monday, December 15, 2014

Over the last few weeks the Australia 200 index has struggled with resistance at 5400 which has forced it lower time and time again. Over the last week it has fallen steadily lower after again trying to push higher which has resulted in moving to two month lows below 5200. Over the last month or so the Australia 200 index has returned some of its recent gains falling from above 5550 down to the lows after earlier finding some reasonable support around 5300. The resistance level at 5400 remains key as the index has since fallen away back below 5200, before reversing and running into the resistance again. A few weeks ago the index was content to consolidate just below the 5400 level. The 5400 level has been a major player all year and the index must get back above this level to encourage more buying and bullish sentiment.

It enjoyed a solid resurgence throughout October after getting much needed support from the 5200 level, which has resulted in it moving back above the 5400 and 5500 levels, around a two month high. Throughout most of September the Australia 200 Index declined strongly from its multi-year high after running into resistance around 5650 back to enter its previously established trading range between 5400 and 5500, before falling further below 5200 and to an eight month low around 5120 a few weeks ago. Several weeks ago it received solid support from the 5100 level which saw it rally well to close out a couple of weeks ago. Back in early September the 5400 level was called upon to offer support as the index desperately tried to stay in touch with its range, however it fell through there before rallying strongly back up to 5400. Up until recently, the 5400 level had done well and propped up price to keep it within the range. In its recent fall at the beginning of August it moved down to a three week low around 5375, however it received solid support at the 5400 level which has allowed to consolidate and rally higher.

The solid move higher throughout July saw it move strongly up through both the 5500 and 5550 levels to reach a then six year high around 5620. In recent weeks it has discovered a new key level to deal with after running into a short term resistance level at 5550, which earlier last week provided some solid support. It reversed strongly several weeks ago bringing it back down to almost touch the 5400 level before rallying back higher again. At the beginning of June the Australian 200 Index fell and broke back down through the key 5500 level towards a four week low around 5400 before consolidating and resting on support there for an extended period. Back 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. The index has done very well over the last couple of years moving from below 4000 to its present trading levels around 5500.

Reserve Bank of Australia Governor Glenn Stevens indicated the nation's currency will probably decline further next year and pushed back against calls for near-term interest rate cuts because the economy is performing as the central bank forecast. "I don't think we see many people at all saying 'look, the cost of money is too high, or I can't get money,'" Stevens said in an interview with the Australian Financial Review published today. "I don't think that's really the problem now." Stevens said Australian inflation, economic growth and employment levels are running close to rates the RBA predicted a year ago, according to the paper. He said the central bank has tried to deliver a message of "stability and predictability" in setting monetary policy as a way of underpinning confidence.

(Daily chart below)

Australia 200 December 14 at 22:15 GMT 5184 H: 5245 L: 5178

Australia 200 Technical

S3 S2 S1 R1 R2 R3
5200 5100 - 5400 5650 -

During the hours of the Asian trading session on Monday, the Australia 200 Index will be trying to reverse its recent down run and return to the recent resistance level at 5400. 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 5600 in September.

Further levels in both directions:

• Below: 5200 and 5100.

• Above: 5400 and 5650.

Economic Releases

  • 00:01 UK Rightmove House Price Index (Dec)
  • 00:30 AU New motor vehicle sales (Nov)
  • 00:30 AU RBA minutes released
  • 13:30 US Empire State Survey (Dec)
  • 14:15 US Capacity utilisation (Nov)
  • 14:15 US Industrial production (Nov)
  • 15:00 US NAHB Builders survey (Dec)
  • 21:00 US Net Long-term TICS Flows (Oct)
  • EU EU Foreign Ministers Hold Meeting in Brussels

* All release times are GMT