After enjoying and relying upon the key support level at .70 in the last week, the Australian dollar has since drifted lower to new six year lows near 0.69. The round number of 70 cents is significant and is likely to be on traders’ minds as the AUD/USD remains right in touch with the level. With RBA’s recent change in tone and the Fed potentially slowing down their rate rise path, there is likely to be substantial number of traders who think the worst is over for the AUD/USD.
The fact that it has now drifted lower below the key 70 US cents level places the AUD/USD in a new range that importantly involves a ‘6’ in front of the price. This is likely to completely change the way the market perceives the Australian dollar way people, which can then self-perpetuate and force the Australian lower again. All of a sudden commentators are now quoting targets of 65 cents and even lower at 60 cents. The more this commentary lingers, the more the market will see bearish signs all over the Australian dollar.
With recent GDP as low as 0.2% for the Q2, concerns are growing about Australia’s growth in the next 12 months and when you include concerns over China as well, the appeal for the Australian dollar is not high.
In the last few weeks the ASX 200 index has enjoyed some much needed support from the key 5000 level, and will be looking for ongoing support as it attempts to regain some lost ground from the last four months or so. Similar to the Australian dollar with 70 US cents, the ASX200 index will be keen on remaining above the key 5000 level.
Despite it recently rallying back to around 5300, the 5000 level remains key and is under ongoing selling pressure. As technical analysts, we often look at key levels and round numbers and round numbers don’t get much bigger than the 5000 level currently with the ASX200 index.
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.