Australia 200 for Wednesday, October 22, 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 and to an eight month low around 5120 a couple of weeks ago. It has however enjoyed a solid resurgence over the last week or so after getting much needed support from the 5200 level and it is now within reach of getting back within the previous range above 5400. Earlier last week it received solid support from the 5100 level which saw it rally well in the last few days to close out last week. Several 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. 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.
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.
There’s a limit to what the Reserve Bank of Australia or, for that matter, any central bank can do. It couldn’t, for example, stop the number of unemployed from rising by 150,000 over the past two and a half years or, presumably, it would have done so. And, now that the unemployment rate has risen, from 5.1 per cent to 6.1 per cent over that time, the RBA can’t wave its magic wand and make it go straight back down again. Instead, according to the minutes of its monthly monetary policy meeting, the RBA’s board concluded that “it would probably be some time before the unemployment rate declined consistently”. It would be nice if the RBA could keep unemployment at rock bottom year in, year out, but there was always going to be a risk that it would rise as the mining investment boom faded. There comes a point, one reached by the RBA late last year, when the only option for a central bank is to sit back and wait for the economy to pick up. In the meantime, it will cross its fingers and hope its monetary policy settings are right.
Australia 200 October 21 at 23:05 GMT 5365 H: 5365 L: 5365
Australia 200 Technical
| S3 | S2 | S1 | R1 | R2 | R3 |
| 5100 | — | — | 5500 | 5650 | — |
During the hours of the Asian trading session on Wednesday, the Australia 200 Index is going to try to continue to rally higher and get back above the key 5400 level, after recently breaking through the 5200 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: 5100.
• Above: 5500 and 5650.
Economic Releases
- 21:45 (Tue) NZ CPI (Q3)
- 00:00 AU Internet Skilled Vacancies (Sep)
- 00:30 AU CPI (Q3)
- 08:30 UK BoE MPC minutes released
- 12:30 CA Retail Sales (Aug)
- 12:30 US CPI (Sep)
- 14:00 CA BoC – Overnight Rate