Live TV Appearance On Sky Business – talking ASX200 Index and AUD/USD

Today I was in Sydney and interviewed by Leanne Jones on Trading Day, Sky Business channel on the Australian market.  Specifically the ASX200 index, the Australian dollar (AUD/USD), and US and China’s impact on Australia.   I was asked about the recent declines in the ASX200 index and AUD/USD and its current significant levels.

The ASX200 index remains quite volatile averaging movement of almost 1.7% a day which tends to indicate an increase in irrational behaviour and behaviour that may be best avoided for many investors. The volatility percentage of the index remains as its highest level in 4 years.

One of my breadth indicators is to simply review how many stocks from the All Ordinaries Index have achieved all time highs in the last week and how many have achieved all time lows. In the last week this running total is at 2 – 13. This indicates that the general market is struggling.  The two high performing stocks are RCG Corporation (ASX Code RCG) and Sydney Airport (ASX Code: SYD), both of which have moved steadily higher in the last six months in the face of strong declines in the broader market.

In the last week or so 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.

In the last 48 hours the Australian dollar has tempted danger as it has dropped below 70 US cents for the first time in many years. It dropped down a couple of times reaching a new low at 0.6982 before rallying to back above 0.7050 before falling further earlier today to around 0.6960.  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.

However if it continues to tread too close to the 70 cents level and spends more than a day or two below this level, then word will quickly spread amongst the markets that the AUD/USD is trading in a new range that importantly involves a ‘6’ in front of the price. That simple move lower can have a significant impact on the way people think – it almost places the Australian dollar into a new category. This can self-perpetuate and force the Australian dollar lower again.  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 hours since midday today, the AUD/USD has drifted lower again to around 0.6960 and is threatening to remain below 0.70.

 

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.