Fed Decision Highlights How Bearish the Market is with A$

> AUD/USD

Despite some relief in the last week which has seen the Australian dollar rally back to above 72 US cents, sellers have taken this opportunity to sell at a three week high for the A$ and provided some resistance.

Not too surprisingly the Federal Reserve left rates untouched at their FOMC meeting citing concerns over global growth.  Interestingly, excessive attention is being placed on this decision, despite the Fed stressing that the timing of the first rate rise is not that important compared to the path that they subsequently follow.

As expected, markets reacted sharply to the announcement with the AUD/USD surging higher to 0.7275 before returning all the gains the following hour.  Whilst other currencies against the USD maintained their surges, the AUD/USD gave up the gains and returned to back below the current key level at 0.72 which is continuing to apply selling pressure.  This is significant and potentially reinforces how bearish the market is with the Australian dollar.

Focus leaves the Fed now for another month an possible returns to China and their slowing growth, which is likely to result in further bearishness with the Australian dollar.

> ASX200

The ASX200 index continues to rely heavily on the 5000 key level although its time might be running out. Over the last few weeks the peaks, or turning points around 5305 and then at 5220 are decreasing in value indicating increased selling pressure on the ASX’s top stocks. As the index rallies, it isn’t returning as high before selling pressure builds and turns the index lower again.

This is likely to place increased pressure on the 5000 level and again test how committed buyers are at that level.

The index volatility remains high at 1.69%, which remains a four year high. This tends to indicate more irrational behaviour than normal and can be a trigger for some investors to step out until the market calms a little.

Within the top 20 stocks, BHP continues to loiter near six year lows and again is threatening to move lower through $23. CSL however continues to hold up well and remain quite resilient to the general market trend as it remains well supported by a range between $85 and $90.

Likewise Macquarie Group is doing well to stay within reach of $80 as it remains within reach of its 2015 high. Scentre Group and Westfield are also remaining close to 2015 highs and ignoring the general market trend.

Origin Energy continues to bring up the rear as it continues to drift lower to new multi-year lows and levels not seen since 2006. Of note, Telstra has finally felt the effects of the market falls as it has also drifted lower in the last month or so and is presently enjoying some much needed support from the $5.50 level.

Stuart McPhee
Stuart McPhee
Australian private trader for nearly 20 years, author, trading coach, licensed adviser and regular speaker at major trading events all around the world. Graduate of RMC Duntroon and former Australian Army Officer.