Levels are Incredible – Market Update

Whenever I conduct any technical analysis, I am always looking for key levels – ie. levels of support and resistance.  Whenever I present to people and conduct live analysis, invariably I will look for key levels and talk about what role they may have in future price movements.

As I type here on a Friday, again I am not surprised at how simple little horizontal lines on a chart are playing a role in the main Australian index and its currency value.  Both the S&P/ASX 200 index and the AUDUSD are currently being influenced by key levels and it can provide traders great insight into what is most likely to happen next.  This is why many years ago, I chose to pursue technical analysis and learning more and more about it.

ASX200

In the last week or so the ASX200 has finally made a move and has broken down through the key 5800 level, however despite its best efforts to rally, it has been unable to move back through.  As I mentioned last week, if it was to remain below the 5800 level for several days, this level would be likely to provide resistance.  This of course makes the 6000 level even further away as there would now be another layer for the index to move through before it can retest the resistance at 6000.

Interestingly the index is quite flat this year.  It opened back on 3 January at 5667 and finished today at 5750.

The all time highs / lows reading this week is 4 / 2.  Stocks achieving all time high this week include Dulux (ASX Code: DLX) and Wisetech (ASX Code: WTC).   The 2 stocks that achieved all time lows are Surfstitch and Ten Network.

Daily chart of S&P/ASX200 Index | Image from MetaStock

AUD/USD

Whilst the Australian dollar has done well in the last few weeks to rally from near 0.73, it has run back into the key level of 0.75 which is causing all sorts of problems and preventing the AUDUSD from moving any higher.   Similar to the index, it is almost duplicating the price action from a few months ago (over New Years) when it dropped through 0.75 but rallied over the next few weeks back up to resistance at 0.75 before succumbing to supply and moving down to a six month low around 0.7150.   We could potentially be only at the start of repeated attempts to move higher through 0.75 before drifting lower, similar to what we saw last December.

If it does drift lower from its current trading levels, the next obvious key level is around 0.7150 where it found solid support around New Years but also around 12 months ago pushing the currency pair higher again back to 0.77 on both occasions.   As we know the Australian dollar has spent considerable time in the last 12 months trading between the two key levels of 0.75 and 0.77, however you could easily picture it drifting lower before returning to that range again.

As I type this, it is currently trading around 0.7430

Daily chart of AUDUSD | Image from MetaStock

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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.