Australia 200 – Retreats from Resistance at 5800

Australia 200 for Tuesday, February 10, 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 few days.  Since that time it has met the force of supply around the 5800 level which has fended off the index, resulting in it easing back a little. A couple of weeks ago saw the resistance at 5500 stand tall and fend off all advances, however this 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 a couple 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 to consolidate and rally higher.

The RBA Governor took a break from domestic monetary policy on Monday to share some thoughts on the internationalisation of the Chinese currency.  Speaking at the launch of the Bank of China in Sydney as the official renminbi clearing bank in Australia, Glenn Stevens said that in the long run “Chinese firms may increasingly wish their trade with Australian firms to be settled in RMB.”  The march of the renminbi towards internationalisation has been a theme for some time now but it is particularly important for Australia, as Asia’s largest economy is a vital market for its commodities exports – primarily coal and iron ore.  The RBA has already tried to facilitate business’ use of the Chinese currency. It established a bilateral local currency swap line with the People’s Bank of China in 2012 and also allows some Australia-based financial institutions to invest in approved mainland Chinese securities under the ‘Renminbi Qualified Foreign Institutional Investor Scheme’.

(Daily chart below)

Australia 200 February 9 at 21:55 GMT   5772   H: 5798   L: 5745

Australia 200 Technical

S3

S2

S1

R1

R2

R3

5400

5150

5100

5800

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During the hours of the Asian trading session on Tuesday, the Australia 200 Index will be looking to make another run at the resistance level at 5800.

Further levels in both directions:

• Below: 5400, 5150 and 5100.

• Above: 5800.

Economic Releases

23:30 (Mon) AU Westpac Consumer Confidence (Feb)

00:01 UK BRC Retail Sales Monitor (Jan)

00:30 AU House Price Index (Q4)

00:30 AU NAB Business Conditions & Confidence (Jan)

09:30 UK Industrial & Manufacturing Production (Dec)

15:00 UK NIESR GDP Est. (Jan)

15:00 US Wholesale Inventories (Dec)

WLD IEA release monthly oil market report

* All release times are GMT

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