Nothing to see here – Market Update

Not much has really happened in the Australian markets in the last week, despite news on oil.  The Australian dollar is roughly where it was this time last week, and the ASX200 has rallied a little but still remains well and truly under 5000.

Oil prices rose sharply this week after Russia and Saudi Arabia, supported by other producers including Venezuela and Iraq, moved to freeze oil output at January’s levels.

RBA

RBA has almost dominated the headlines this week starting with the RBA Minutes being released earlier this week.   After keeping the official cash rate at 2%, the minutes said, “There continued to be evidence that very low interest rates were supporting growth in household consumption and dwelling investment and that the depreciation of the exchange rate was boosting demand for domestic production as it adjusted to the evolving economic outlook.”

Then you had RBA assistant governor Malcolm Edey telling everyone to stop being spooked by the markets.  “The main point that I’ve been trying to get across today is: don’t automatically swing to the most pessimistic interpretation because that’s what we see in a lot of media commentary, a kind of knee-jerk tendency to be as pessimistic as possible,” he told the Australian Shareholders Association Investor Forum in Sydney on Thursday.

On the Australian dollar, RBA board member John Edwards has been recently quoted saying he would be more comfortable with a level around 65 US cents for the local currency, although he’s not confident a drop to that level would occur.  He said, “It does look like it (the Australian dollar) has found a base, and I guess I would say I still think it is a bit too high,” Edwards said. “If it was driven entirely by commodity prices, it certainly should be lower,” he added.

Finally, the Australian unemployment rate has jumped to 6%, as economists had predicted the jobless rate staying at 5.8%

AUD/USD

The Australian dollar really hasn’t done much as it continues to defy gravity as it remains above the key 0.70 level, which has supported it well over the last few weeks.  It has however met significant resistance again at 0.72 which is keeping it within a narrow range.

The problem is that it isn’t really delivering ample trading opportunities for people.

ASX200

It also hasn’t done too much although it has rallied well to just under the key 5000 level again.


Image from MetaStock

Even though it has rallied over the last week, it still remains under the 5000 level and the longer term trend is still clearly down.

The volatility of the index remains a concern – this is shown with the red line in the chart above, and it remains well above 1.5% where it has been for the last month.  Volatility is good in individual stocks, currencies etc, however not necessarily in a broad-brush market index.

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.