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ASX 200 Technical Analysis Talking Points:

  • The ASX seems to have consolidated without losing too much altitude, if any
  • This would seem to be a very bullish sign
  • However, there are also indications that the market is quite uncertain

Find out what retail foreign exchange traders make of the Australian Dollar’s chances right now at the DailyFX Sentiment Page.

The ASX 200 is still testing the top of its dominant uptrend channel, but the bulls have obviously not given up hope of driving onward to the record peak, now fewer than 200 points above the market.

The fundamental story looks clear enough. The prospect of lower global interest rates (not least in Australia), has given most major stock markets a lift. Last weekend’s news that China and the US have shied away from imposing further tariffs on each other’s imports may not be quite the trade progress markets desperately need, but at least the two titans are still talking.

It may be that markets are overpricing the extent of likely easing. For one thing the US President has said that tariffs against Mexico are now off the table, and that prospect was a big part of the latest re-pricing of US rates. Other central bankers, notably Australia’s Philip Lowe, have wondered aloud about how effective further rate cuts might be.

Still the Australian Dollar has also slipped a little against its us cousin, possibly burnishing the appeal of domestic stocks to offshore buyers.

Technically the ASX has been confined to a short term daily chart range between 6605 and 6700 since June 18.

ASX 200, Daily Chart

Perhaps maddeningly this has also seen it bounce along the top of that uptrend channel without a conclusive break. Bulls may well see this as a good sign, as altitude has clearly been sustained even as momentum winds back from the overbought levels of late June.

However there have also been many recent days where the gap between the open and the close has been extremely narrow. Spells such as this can indicate heightened uncertainty in a market and the uncommitted may want to see how this one plays out.

It’s hard to get too bearish about the ASX at this point, to be sure, but a clear retracement back into the upward channel could see support from mid-June in the 6570 area tested again, even if it would probably hold barring some bad fundamental news out of left-field.

If however the bulls can hold the line then they’ll try to consolidate above the 6700 range top before girding themselves for another shot at the record.

ASX 200 Resources for Traders

Whether you’re new to trading or an old hand DailyFX has plenty of resources to help you. There’s our trading sentiment indicator which shows you live how IG clients are positioned right now. We also hold educational and analytical webinars and offer trading guides, with one specifically aimed at those new to foreign exchange markets. There’s also a Bitcoin guide. Be sure to make the most of them all. They were written by our seasoned trading experts and they’re all free.

--- Written by David Cottle, DailyFX Research

Follow David on Twitter@DavidCottleFX or use the Comments section below to get in touch!