Australia 200 – Back in Familiar Territory Above 5400

Australia 200 for Friday, January 23, 2015

In the last couple of days the Australian 200 index has surged higher to move back above the key 5400 level to a one week high as it desperately tries to hang on to this important trading range for the index.  During the last week or so 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 the last week before the surge higher. The short-term resistance level at 5500 continues to loom large and is placing selling pressure on the index as well as battling with likely resistance above 5400 again too. 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 to consolidate and rally higher.

Australia’s central bank has kept its benchmark interest rate at a record low for 17 months — the longest period on hold in almost two decades — as the economy has gone from mining investment boom to bust.  A growing group of economists say it’s time to cut again.  The number anticipating a rate reduction in the first half of the year has grown to 11 of the 35 surveyed by Bloomberg News in Jan. 15-20, up from six out of 26 in December. They include three of Australia’s four major banks, the country’s largest investment bank and Deutsche Bank AG.  Reserve Bank of Australia Governor Glenn Stevens, who will hold the year’s first policy meeting on Feb. 3, has been reluctant to reduce the overnight cash rate target from 2.5 percent where it has been since August 2013. “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,’” he said in an interview with the Australian Financial Review published Dec. 12 — his most recent public comments.

(Daily chart below)

Australia 200 January 22 at 22:20 GMT   5447   H: 5447   L: 5378

Australia 200 Technical

S3

S2

S1

R1

R2

R3

5150

5100

—

5400

5500

—

During the hours of the Asian trading session on Friday, the Australia 200 Index will be trying to maintain price above the key 5400 level after surging higher in the last couple of days.

Further levels in both directions:

• Below: 5150 and 5100.

• Above: 5400 and 5500.

Economic Releases

09:30 UK Retail Sales (Dec)

11:00 UK CBI Distributive Trades (23rd-27th) (Jan)

13:30 CA CPI (Dec)

13:30 CA Retail Sales (Nov)

15:00 US Existing home sales (Dec)

15:00 US Leading Indicator (Dec)

* All release times are GMT

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