Australia 200 for Wednesday, October 8, 2014
Since the beginning of September the Australia 200 Index has 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 in the last couple of days. It is presently trying to rally higher from the support level around 5200 after recently threatening to break through this level for the first time since February 2014. A few weeks ago 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. It has now fallen sharply to an eight month low below 5200. Up until recently, the 5400 level had done well and propped up price to keep it within the range. For most of this year when the index has fallen to the 5400 level, it has bottomed out at around 5370 however this latest has failed as it continued to fall lower.
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.
The 5400 and 5500 levels firmly established themselves as significant and now that we have seen a substantial break to one side, momentum has kicked in and seen the index fall strongly lower. 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.
The RBA kept its key interest rate at a record low to spur hiring in an economy struggling to expand outside the property market. The overnight cash rate target was held at 2.5 percent for a 14th month, Governor Glenn Stevens said in a statement yesterday following an RBA board meeting. The decision was predicted by all 26 economists surveyed by Bloomberg News and markets had priced in almost no chance of a move. The central bank is trying to foster domestic growth, including residential construction, to soak up former mine workers and avoid a growth gap emerging as a resource investment boom fades. While a 7 percent drop in the currency last quarter may encourage companies to open their pocket books and invest, policy makers are struggling to cool property investment that is starting to distort the housing market. “Increased investor participation in the property market is a concern and the introduction of macroprudential tools looks more likely,” Katrina Ell, an economist at Moody’s Analytics in Sydney, said before the decision. “Rate normalization will not be considered until the labor market shows sustained improvement.”
Australia 200 October 8 at 02:40 GMT 5230 H: 5235 L: 5190
Australia 200 Technical
| S3 | S2 | S1 | R1 | R2 | R3 |
| 5200 | — | — | 5500 | 5650 | — |
During the hours of the Asian trading session on Wednesday, the Australia 200 Index is trying to rally higher from the support level around 5200 after recently threatening to break through this level for the first time since February 2014. 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: 5200.
• Above: 5500 and 5650.
Economic Releases
- 21:45 (Tue) NZ Retail Card Spending (Sep)
- 23:01 (Tue) UK RICS House Price Balance (Sep)
- 23:50 (Tue) JP Key Machinery Orders (Aug)
- 12:15 CA Housing starts (Sep)
- 18:00 US Fed releases minutes from prior (Sep 16-17) FOMC meeting
- JP Economy Watchers Survey (Sep)
- JP BoJ Publication of Monthly Report