ASX 200 selling pressure builds as Aussie Dollar falls

The ASX 200 broke resistance at 5200, but bearish divergence on 13-week Twiggs Money Flow continues to warn of selling pressure.
ASX 200 Index

The daily chart also shows a bearish divergence, suggesting a test of support at 5100/5120. Failure would indicate a correction, while respect would confirm an advance to 5400*.
ASX 200 Index

* Target calculation: 5150 + ( 5150 – 4900 ) = 5400

Bipolar behavior of the market is highlighted by comparison of the ASX 50 Large Caps to the ASX Small Ords (ASX 300 – ASX 100). Small Caps tend to outperform Large Caps during a bull market, as can be seen from 2003 to 2007. But the current “bull market” gives out mixed signals, with Large Caps powering ahead while Small Caps remain in a down-trend. Demand for Large Caps seems to have been inflated by international capital flows.
ASX 50 Index
And the falling Aussie Dollar, with a target of $0.96* against the greenback, is likely to lead to retreat of the ASX 50 and ASX 200 indices.
Aussie Dollar

* Target calculation: 1.01 – ( 1.06 – 1.01 ) = 0.96

2 Replies to “ASX 200 selling pressure builds as Aussie Dollar falls”

  1. ASX recovery from GFC levels ran behind at about 50% DJIA growth levels and well behind most major bourses. Reason most stated was strength in AUD rising about 50% against USD over similar period. Is the reversal of this logic driven by fear rather than value the reason for the ASX now falling in sympathy with the AUD. Appreciate your views. John S Snr

    1. RBA and government would like to see the Aussie dollar weaken, therefore they are not opposing hedge funds trying to profit by scaring international investors out of their Aussie dollar positions. Falling AUDUSD would enhance export earnings, while investors withdrawing from the ASX would drive down prices. A good opportunity for local investors.

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