By Stuart McPhee
Australia 200 for Friday, February 6, 2015
In the last few weeks, the Australian 200 index has done very well and surged higher to move back above the key 5400 level to reach a new six-year high just above 5800 in the last couple of days. Since that time, it has just eased back a little. For a few days during last week, the resistance at 5500 stood tall and fended off all advances; however, this has now been broken strongly through. The recent move higher from below 5300 to above the key level of 5400 is important as it desperately tries to hang on to this important trading range for the index above 5400. In the week prior, the Australia 200 Index eased back again under the 5400 level after making numerous attempts to clear it over the last month, which saw it drop to a three-week low below 5250 before its recent surge higher.
The moderate support from around the 5300 level held it up well for a couple of weeks before the surge higher. The short-term resistance level at 5500 has returned and now resumes its role of placing selling pressure on the index. Throughout most of November and December, the Australia 200 Index fell steadily lower down towards support around 5150 and two-month lows before rallying back above 5400 again. Over the last few weeks, the Australia 200 index has struggled with resistance at 5400, which has forced it lower time and time again. The 5400 level has been a major player for the last 12 months 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 it to consolidate and rally higher.
Australia's markets, which flagged an interest rate cut most economists missed, are signaling two more reductions as the central bank seeks a weaker currency. Futures contracts show about 80 percent odds Reserve Bank of Australia Governor Glenn Stevens will bring the target for overnight loans between banks down to 1.75 percent by year-end from 2.25 percent now. Stevens and his fellow policy makers reduced the rate by 25 basis points on Tuesday to a record and said the Australian dollar remains overvalued. The RBA joined counterparts from Canada to Singapore to Russia in easing policy this year as tumbling commodity prices add to disinflationary pressures. The rate cut weakened the Aussie to within 1.5 U.S. cents of the 75 level Stevens said in December he prefers. Growth will be weaker for longer and the jobless rate will peak higher earlier than expected, he said after Tuesday's decision.
(Daily chart below)
Australia 200 February 5 at 23:40 GMT 5807 H: 5817 L: 5794
Australia 200 Technical
During the hours of the Asian trading session on Friday, the Australia 200 Index is remaining quite steady just below the resistance level at 5800.
Further levels in both directions:
• Below: 5400, 5150 and 5100.
• Above: 5800.
- 00:30 AU RBA statement on monetary policy
- 05:00 JP Leading indicator (Prelim.) (Dec)
- 09:30 UK Trade Balance (Non-EU) (Dec)
- 09:30 UK Visible Trade Balance (World) (Dec)
- 13:30 CA Building permits (Dec)
- 13:30 CA Unemployment (Jan)
- 13:30 US Non-farm & Private Payrolls (Jan)
- 13:30 US Unemployment (Jan)
- 20:00 US Consumer Credit (Dec)
* All release times are GMT