Jump to content

Is the recent rally over for ASX and AUD/USD? Where to next?



The risk-on sentiment started to fade towards the end of the financial year amid ongoing worries about high inflation and slowing economic growth. The impacts for ASX and AUD/USD could be significant.

BG_australia_aus_asx_3094886169651651919Source: Bloomberg
Hebe Chen | IG Market Analyst, Melbourne | Publication date: Wednesday 29 June 2022 

The risk-on sentiment started to fade towards the end of the financial year amid ongoing worries about high inflation and slowing economic growth. As we are approaching a new month with potentially more rate hike discussions and the start of the second-quarter reporting season, it might be sensible for traders to stay with a cautious strategy to prepare for all the uncertainties ahead.

Meanwhile, commodities hold centre stage again as the G7 leaders are working toward capping Russian oil prices to reduce the Kremlin's income from oil to finance the war. In addition, the G7 plan to announce a ban on new gold imports from Russia.

Today, we are look at the below markets:

ASX 200

The ASX 200 has climbed by nearly 5% over the past two weeks. The energy sector and the utilities are the biggest winners with more than 6% gains in a week. Technology stocks soared by more than 8% last week after plunging 36% since the early days of 2022.

Although a recession in the local economy appears to be a lesser concern for Australian traders than their peers in the US, inflation concerns and a busy rate hike schedule are the main challenges for the second half of the calendar year. The RBA anticipate the consumer price index in Australia to reach 7% by the end of the year to mark a new three-decade-high. While RBA Governor Philip Lowe has ruled out a 75 basis point hike for next Tuesday's interest rate decision, the money market still expects the interest rate to rise to 3.2% in December from the current rate at 0.85%.

Daily and weekly charts show that last week's rally has potentially confirmed a short-term bottom. The 20-day moving average is now a focus on the upside at 6805

After breaking through the 20-day moving average, the level of 6869 is now focused on the upside. While on the weekly chart, a gap between 6760-6810 will be the imminent task for bulls to conquer. Dips may find support at 6600.


This week, the Australian dollar has found some support from China’s better-than-expected industrial profits data and the nation’s most recent announcement to reduce the quarantine period from 21 days to 10 days.

While the data showed declining profits both YTD and YoY for the month of May, the declining pace has decreased significantly from the April print. As a result, the China-sensitive Australian currency has since seen some gains.

The Australian dollar is currently hovering above the 2-year-low of 0.6829. The next challenge on the upside for the pair will be around 0.6997 and 0.7074. In between, the level of 0.70 will be a critical psychologically level for the pair to regain. Conversely, the risk of slipping back to below 0.69 still can’t be ruled out.


Recommended Comments

There are no comments to display.

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • Blog Statistics

    • Total Blogs
    • Total Entries
  • Latest Forum Topics

  • Our picks

    • Swiss Franc Firming Against US Dollar and Euro. Will Momentum Take CHF Higher?
      EUR/CHF made a 7.5-year low at the end of last month at 0.9699, moving below the previous low of 0.9804.

      Since breaking lower, the price has not managed to reclaim 0.9804 and it may continue to offer resistance. The 21-day Simple Moving Averages (SMA)is currently at that level, potentially adding resistance.

      Further up, the recent peak of 0.9957 might offer resistance ahead of the break point at 0.9973.

      In the last session, the price has crossed below the 10-day SMA and remains below the 21-, 55-, 100- and 200-day SMAs.

      A bearish triple moving average (TMA) formation requires the price to be below the short term SMA, the latter to be below the medium term SMA and the medium term SMA to be below the long term SMA. All SMAs also need to have a negative gradient.

      Looking at EUR/CHF, the criteria for a bearish TMA has been met and may indicate that bearish momentum could evolve further.

      Support might be at the recent low of 0.9699 or further down at the 161.8% Fibonacci Extension of 0.9638.


      Chart created in TradingView 


      USD/CHF has bounced off low made at the start of this month at 0.9470 to trade in a wide range of 0.9545 – 0.9650. These levels might provide support and resistance respectively.

      While the price is below all short-, medium- and long-term Simple Moving Averages (SMA), they have positive and negative gradients. This may suggest a lack of conviction for directional momentum that might see further range trading.

      Re-iterating this possibility is the price criss-crossing the 10-day SMA. Recent history has shown that when the price crosses the 10-day SMA, momentum in that direction continues. That is not the case over the last week.

      The recent low of 0.9470 may provide support ahead of the break point at 0.9460. On the topside, resistance might be at the break point of 0.9710 or the July peak of 0.9886.

       Chart created in TradingView

      Daniel McCarthy, Strategist Daily FX

      Source: Daily FX
      • 0 replies
    • Post in FTSE 📈 to drop soon
      Check out phillo's analysis on the FTSE100. Are you tracking any technical analysis for the FTSE you want to share? If so join the forum.
        • Like
    • Rolls-Royce share price: half-year results
      Rolls-Royce shares (LON: RR) sunk by 10% to 83p on Friday after half-year results spooked investors over long-running problems with supply chain issues and inflation.
      • 0 replies
  • Create New...