AUD/USD Struggles with Resistance at 0.72 as ASX200 Needs 5000

AUD/USD

The Australian dollar continues to struggle with the current key level of 72 cents as it has been pushed away again by a glut of supply. It has formed a couple of classic reversal patterns on the daily chart (image below) with a doji followed by a pin bar. Both of these represent weakness in the prevailing trend and a reasonable chance that the support at 70 cents will be tested again shortly.

After last week’s FOMC meeting and the Federal Reserve deciding to hold off on raising rates, attention has now turned back to China and their growth and how they may impact on Australia and the A$. The fact that the Fed also highlighted growth concerns, doesn’t help the Australian dollar’s cause.

AUDUSD_

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, 5220 and more recently at 5200 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 and has moved higher to near 1.8%, which sets a new 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. (image below).

XJO_20150921

Within the top 20 stocks, 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, and more recently the $90 level.

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 has fallen again to reach multi-year lows and levels not seen since 2006. Even worse is how much more volume has accompanied the selling in the last month or so. Likewise Woodside Petroleum is close to moving to 10 year lows.

Woolworths is also in a precarious position receiving some support around $24 but very close to falling to new lows not seen since 2007, highlighting its current fortunes and the difficult retail environment.

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.