Australia 200: Enjoys Support From Key 5800 Level

 | Mar 17, 2015 01:37AM ET

Australia 200 for Tuesday, March 17, 2015

Over the last week or so the ASX200 index has found some support at the key 5800 level which has propped it up and allowed it to rally a little and move to back above 5850. Over the last couple of weeks the ASX200 index has reversed from its highs near 6000 and now has established a new medium term down trend forming a peak around 5870 and then moving lower towards the recent trough around 5740. If it is to move lower through the trough around 5740, then lower values should be expected with the next obvious support level around 5700. It enjoyed a strong move higher throughout February moving from below the key 5800 level up to another multi-year high near 6000, where it met stiff resistance.

At the beginning of February it spent a week or so battling with resistance at the key 5800 level which repeatedly fended off the index, resulting in it easing back a little. This level has resumed its key role and is currently having an impact on the index. Throughout the second half of January the Australian 200 index did very well and surged higher to move back above the key 5400 level and push on through to the new highs. At this time, the resistance at 5500 stood tall and fended off all advances, however this now been broken strongly through.

The moderate support from around the 5300 level held it up well for a a couple weeks before the surge higher. The short-term resistance level at 5500 has returned and now resumes its role of placing selling pressure on the index. Throughout most of November and December, the Australia 200 Index fell steadily lower down towards support around 5150 and two month lows before rallying back above 5400 again. Over the last few weeks the Australia 200 index has struggled with resistance at 5400 which has forced it lower time and time again. The 5400 level has been a major player for the last 12 months and the index must get back above this level to encourage more buying and bullish sentiment. It enjoyed a solid resurgence throughout October after getting much needed support from the 5200 level, which has resulted in it moving back above the 5400 and 5500 levels, around a two month high.

The Reserve Bank of Australia decided to wait for more economic data before making a further cut to the official cash rate, after facing concerns about speculative lending. Concerns about speculative borrowing and lending, where credit had continued to grow faster than incomes, caused the board to wait for more data before making another rate move, according to minutes of the RBA’s March meeting, when the board kept rates on hold. The RBA saw advantages in receiving more data to indicate whether or not the economy was on the previously forecast path, before moving the cash rate again, as the board members faced a “greater degree of uncertainty about the behaviour of borrowers and savers in a world of very low interest rates”. The board has kept open the opportunity for further rate cuts, arguing that the case to ease monetary policy further might emerge, but members saw benefit in allowing some time for the structure of interest rates and the economy to adjust to the earlier change. The RBA held the official cash rate at its record low level of 2.25 per cent at the March meeting after a surprise February rate-cut, bucking the general consensus that the bank tends to deliver cuts in pairs. The March decision sent the sharemarket reeling and rallied the Australian dollar against the US currency.

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