Market News & Analysis
ASX200 consolidation ahead
Tony Sycamore May 4, 2020 1:48 PM
After an 8.8% rebound in April, the ASX200 followed the “sell in May and go away” roadmap to its strictest interpretation last week, plunging 5% on the very first day of May.
The catalyst for the sell-off, the Trump administration threatened China with tariffs on imports for its handling of the coronavirus.
While I have been quietly confident that global equity markets supported by rapid central bank and government action would allow equity markets to look through the impacts of coronavirus and continue their impressive recoveries, there are concerns that risk appetite is sturdy enough to withstand the dual-threat of COVID-19 and a renewal in U.S.- China trade hostilities.
Following its underwhelming preparation and management of the COVID-19 pandemic and with the U.S. election now just six months away, polling has shown that anti-China rhetoric is a reliable avenue to rebuild voter support for the current U.S. administration.
Therefore, more anti-China rhetoric and possibly an increase in tariffs from the U.S. in the second half of 2020, is probable and this brings into question the sustainability of the AS200’s rally from its March lows.
More so as investors have used the Australian equity market and the AUDUSD as a proxy to position for an economic recovery in China.
Looking at the daily chart of the ASX200, we favour that a short term high is in place at the April 17th 5563 high and are now looking for four to six weeks of consolidation between 5550 and support at 4850 (the 61.8% Fibonacci retracement of the April rally).
Following the completion of this correction and supported by the continued re-opening of economies and pickup in economic activity, we expect to see the rally resume that takes the index towards 6000 early in the second half of 2020.
Keeping in mind, that a break/close below support at 4850 would be a setback to the view outlined above and warn of a retest of March lows.
Source Tradingview. The figures stated areas of the 4th of May 2020. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.
Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.