Despite some relief in the last few days which saw the Australian dollar rally to back above 70 US cents, the bears have jumped back into the market and pushed the AUD/USD to back below 70 cents again. In doing so it has formed a classic reversal candlestick pattern called a pin bar which has been accompanied by the key 0.70 level increasing the probability of lower prices in the immediate future.
The AUD/USD’s cause wasn’t helped earlier today with the RBNZ cutting its official cash rate and indicating that further cuts are likely. RBNZ Governor Graeme Wheeler said, “Some further easing in the OCR seems likely, depending on the emerging flow of economic data”.
With the AUD/USD rolling over and back through 0.70 again, this is likely to resume the medium term down trend that has been in place since mid May.
The ASX200 index has definitely enjoyed and benefited from solid support from the key 5000 level. Over the last few weeks this key level has been called upon several times and responded every time with a surge of demand for large ASX stocks pushing the index back above 5200.
Of some concern is that the index volatility remains high. Since 24 August the index volatility percentage has been above 1.5% which is unusually high for a broadbrush index. 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.
Interestingly for the first time in a long time, all industry sectors have turned red over the last 3 and 6 months, whilst the Energy sector continues to lag behind everything else.
The 4 big banks are all mirroring the ASX200 index as they are all currently relying on support levels, with around $71 for CBA and just $30 for the others. Westfield (WFD) and Scentre Group (SCG) remain the most resilient amongst the top 20 stocks.
Only 2 stocks from the All Ordinaries Index in the last week have achieved all time highs (Blackmores and TPG) whilst another 5 achieved all time lows.