ASX 200 weakens but Aussie dollar strengthens

  • Aussie dollar strengthens.
  • Stocks weaken.
  • But ASX 200 VIX continues to indicate a bull market.

The Aussie Dollar is testing resistance at $0.94. Consolidation in a narrow band suggests continuation of the rally towards $0.97/$0.98. Recovery of 13-week Twiggs Momentum above zero suggests a primary up-trend, but we may see the RBA intervene to prevent this. They may need to follow the RBNZ, introducing macro-prudential controls (e.g. setting a maximum 80% LVR percentage), to take the steam out of the housing market while lowering interest rates to weaken the currency.

Aussie Dollar

The ASX 200 respected resistance at 5500 and is headed for a test of medium-term support at 5400. Reversal of 21-day Twiggs Money Flow below zero warns of medium-term selling pressure and a correction. Breach of 5400 is likely and would test support at 5300 and the rising trendline. Respect of 5400 is unlikely, but would suggest another rally to 5550.

ASX 200

* Target calculation: 5550 + ( 5550 – 5400 ) = 5700

ASX 200 VIX below 12, however, continues to indicate low risk typical of a bull market.

ASX 200