Today I was interviewed again by Carson Scott on Trading Day, Sky Business channel on the Australian market, specifically the ASX200 index, the Australian dollar (AUD/USD), and RBA and Fed plans. Specifically I was asked about the recent decline in the ASX200 index and its current significant levels.
I mentioned how the 5400 level had done a solid job in the last couple of months of supporting the ASX200 index however with recent falls, this level had now failed. It wasn’t so long ago we were discussing the 6000 level and whether the ASX200 was going to break through there and now we are looking at previous support from October and December 2014 around 5100. The index will now be eyeing off potential support at this level should it remain below 5200 today.
Carson asked whether I thought the global markets, specifically US and European markets, was heavily influencing the ASX. I agreed that they were obviously having an impact however I also mentioned that the big 4 banks were not having a great time of late and their prices had suffered and then you throw in BHP, Rio Tinto and the energy companies and the ASX200 index has little choice but to decline strongly.
Finally we spoke about the AUD/USD and whether the Fed holding off on raising interest rates may provide some support for the Australian dollar. The Australian dollar continues to trade within a narrow range between 0.73 and 0.74 where it has mainly loitered for the last month, but interestingly it seemingly looks stuck in no man’s land. It doesn’t know where to turn next.
It has depreciated significantly against the US dollar amongst other major currencies but now the RBA message has changed. No longer are they talking the currency down and now traders are looking for further cues. It is doing well to hold onto the 0.73 level and even with weak China PMI data earlier in the day, the AUD/USD didn’t decline that much and is still holding onto the 0.73 level. The Fed’s potential rate rise has been looming all year and is highly likely to happen this year. This has been well publicised but what is more important than the timing of the first rate rise, is the path of gradual increases over the next year or so. We may just see a softening in the US dollar however I didn’t think it would translate into a strong boost for the AUD/USD.