The Australian dollar is remaining resilient holding onto 69 US cents as seemingly everything around it is falling sharply. For some time the 69 and 70 US cents levels have been significant and have supported the local currency several times in the last few months. Over the last couple of weeks however the 70 US cents level has triggered strong selling demonstrating strong resistance and that a sustained move back above the level highly is unlikely.
For this reason, it is a little odd that buyers are prepared to buy into the Australian dollar when the potential upside and profit is limited. It is most likely being bought up on the basis of it trading at new 7 year lows and bargain hunting. Even the leg up received by the reasonably positive employment data last week wasn’t enough to sustain its push above 0.70. Its resilience today may also be related to gold’s surge higher which sent it to above $1100 for the first time in a week.
There remains widespread bearish sentiment with the A$ with some forecasts as low as 60 US cents, so there is a general feeling of inevitability over the currency’s slide.
With China stocks already down 20% for 2016 and the US 11%, a reprieve of selling is expected soon as some clarity and sanity rule. The ASX200 is right in touch with the 4900 level which has done a solid job over the last five months of propping up the index. This level might be the catalyst to see some stability in the ASX for the immediate future and halt the declines.
The 4900 level continues to prop up the ASX200 index as bargain hunters jump in and push the market higher. As external factors are driving a lot of what we are seeing in the ASX, doubts linger as to whether the index can rally enough and return to the previous highs around the 5350 to 5400 range in the next couple of weeks.