Australia 200 – Threatening to Return to Above 5500 Again 

Australia 200 for Friday, October 31, 2014

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 couple of weeks ago. It has however enjoyed a solid resurgence over the last few weeks after getting much needed support from the 5200 level and has now returned to its previous range above 5400 where it is presently consolidating and remaining within. It has more recently started to look towards the other key level of 5500 and may return back above there soon. A couple of weeks ago it received solid support from the 5100 level which saw it rally well to close out a couple of weeks ago. 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.

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.

Australia’s terms of trade slide continued in the September quarter. The terms of trade is a measure of Australia’s luck. It’s the ratio of export prices to import prices, so it’s a gauge of whether Australia is having to sell more tonnes of coal or bales of wool in order to buy a given quantity of plasma televisions, cars, dresses or smart phones. And, it turns out, it is. The import price index fell by 0.8 per cent in the September quarter, according to figures from the Australian Bureau of Statistics on Thursday. But the export price index dropped by 3.9 per cent, continuing the pattern seen since mid-2011. Since then, the price of exported goods has fallen by 23 per cent relative to import prices. Or, to put it another way, for every tonne, bale, ounce or bushel of stuff Australia had to export in order to buy a load of imports in 2011, it now has to export 1.3 tonnes, bales, ounces or bushels to pay for the same bundle of imports. The national accounts, the source of estimates of gross domestic product (GDP), have a broader measure of the terms of trade – it includes trade in services like travel and tourism. It’s very likely to show a similar result for the September quarter.

(Daily chart below)

Australia 200 October 30 at 22:20 GMT 5477 H: 5490 L: 5431

Australia 200 Technical

During the hours of the Asian trading session on Friday, the Australia 200 Index will be trying to maintain its recent good form and remain 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

• 00:05 UK GfK Consumer Confidence (Oct)
• 04:00 JP Housing starts (Sep)
• 04:00 JP Construction orders (Sep)
• 10:00 EU Flash HICP/ Core (Oct) (y/y)
• 10:00 EU Unemployment (Sep)
• 12:30 CA GDP (Aug)
• 12:30 US Personal income & spending (Sep)
• 12:30 US Core PCE Price Index (Sep)
• 13:45 US Chicago PMI (Oct)
• 13:55 US Univ of Mich Sent. (Final) (Oct)
• JP BoJ Monetary Policy meeting
• JP BoJ Publication of Outlook Report

* All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities.

Source: marketpulse

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