Australia 200 – Drops to Three Month Low Near 5550

Australia 200 for Friday, May 8, 2015

The last few days have seen significant declines in the Australia 200 index which has resulted in it reaching a three month low just below 5550.  After making another solid run at the key 6000 level earlier last week but again being forced back by overwhelming supply at that level, the Australian 200 index dropped sharply to move through the 5800 level down to a two month low below 5750, before rallying well to finish out last week. It has since reversed again and looks threatening to remain below 5800. The index will now be hoping for the long term support level around 5800 to kick in and continue to prop it up. Several weeks ago the Australian 200 index showed some positive signs and moved well towards the resistance at 6000 before finishing the week strongly lower. It now looks poised again to test the key 6000 level and if this level is broken, it is reasonable to expect a large shift towards bullish sentiment and potentially the index could really take off – it seems as if everyone is just waiting for it to happen. Several weeks ago the Australia 200 index pushed higher to a multi-year high to just above the key resistance level at 6000, before easing lower throughout the last couple of weeks to below 5900. It is receiving ongoing support at 5800, which is helping its latest push towards 6000. The key 6000 level remains firm and a significant obstacle and the index and markets are firmly fixed on it.

Back in mid-March the ASX200 index found some support at the key 5800 level which has propped it up and allowed it to rally a little and move higher, and of course it will be hoping to receive the same again. Back in early March the ASX200 index reversed from its highs near 6000 and started to establish a new medium term down trend before rallying higher a couple of weeks ago. It enjoyed a strong move higher throughout February moving from below the key 5800 level up to another multi-year high near 6000, where it met stiff resistance. At the beginning of February it spent a week or so battling with resistance at the key 5800 level which repeatedly fended off the index, resulting in it easing back a little. This level has resumed its key role and is currently having an impact on the index.

Throughout the second half of January the Australian 200 index did very well and surged higher to move back above the key 5400 level and push on through to the new highs. At this time, the resistance at 5500 stood tall and fended off all advances, however this now been broken strongly through. 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.

Australian employers unexpectedly cut jobs in April as a mining investment boom unwinds and a resilient currency weakens the competitiveness of local industries.  The number of people employed fell by 2,900 from a month earlier, compared with economists’ forecasts for a 4,000 gain, government data showed Thursday. The jobless rate rose to 6.2 percent from 6.1 percent.  The central bank reduced interest rates to a record 2 percent this week to help offset the currency’s strength amid predictions that industries outside the resources sector aren’t investing sufficiently to pick up slack in the economy. Australia is on track to grow below its potential rate for six of the past seven years.  The data “supports the RBA’s decision this week to reduce the cash rate,” Aberdeen Asset Management Senior Investment Manager David Choi said in an e-mail. “It points to the continued fragility of the Australian economy. We expect the RBA to cut rates further to boost consumption, in the medium term.”

(Daily chart below)

Australia 200 May 8 at 00:30 GMT   5615   H: 5633   L: 5559

Australia 200 Technical

S3

S2

S1

R1

R2

R3

5550

5400

—

6000

—

—

During the hours of the Asian trading session on Friday, the Australia 200 Index will be looking to reverse and repair some of the damage from its recent strong falls.

Further levels in both directions:

• Below: 5500, and 5400.

• Above: 6000.

Economic Releases

01:30 AU RBA release Statement on Monetary Policy

08:30 UK Trade Balance (Non-EU) (Mar)

08:30 UK Visible Trade Balance (World) (Mar)

12:15 CA Housing starts (Apr)

12:30 CA Unemployment (Apr)

12:30 US Non-farm & Private Payrolls (Apr)

12:30 US Unemployment (Apr)

14:00 US Wholesale Inventories (Mar)

JP BoJ release minutes

* All release times are GMT

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