Australia: S&P/ASX 200 (.AXJO) drops as US Federal Reserve keeps interest rates on hold

Australia: S&P/ASX 200 (.AXJO) drops as US Federal Reserve keeps interest rates on hold

Australia: S&P/ASX 200 (.AXJO) drops as US Federal Reserve keeps interest rates on hold

The Australian dollar jumped to 68.8 US cents, its highest value in five weeks, due to a weaker greenback following the Fed’s interest rate decision.

It also lifted sharply to 52.1 British pence as the latest polls revealed that UK Prime Minister Boris Johnson’s previously strong lead had narrowed considerably.

Although Mr Johnson and the Conservatives are still the favourites to win the election, there is a possibility they may not command a parliamentary majority — which could lead to further Brexit uncertainty.

On Wall Street, the Dow Jones index closed 0.1 per cent higher at 27,911 points.

Amid a cautious trading session, the benchmark S&P 500 and tech-heavy Nasdaq lifted by 0.3 and 0.4 per cent respectively.

Spot gold jumped to $US1,478 an ounce, while Brent crude oil fell sharply to $US63.94 per barrel.

Fed holds rates steady

As expected, the Fed voted to keep its benchmark rate unchanged at the 1.5-1.75 per cent target range.

Australia’s record-low cash rate, in comparison, is 0.75 per cent and is expected to fall even lower by February 2020.

The US central bank has also signalled that borrowing costs are likely to remain at that level indefinitely, having slashed rates three times since June.

“Our economic outlook remains a favourable one, despite global developments and ongoing risks,” Fed chair Jerome Powell said in a news conference following the decision.

“We believe monetary policy is well positioned to serve the American people by supporting continued economic growth, a strong job market and inflation near our 2 per cent goal.”

New economic projections show a solid majority of 13 of 17 Fed policymakers foresee no change in interest rates until at least 2021 — while the other four expect only one rate hike next year.

Two months ago, Mr Powell said it would take a “material” change in the economic outlook for the Fed to change rates again.

The prevailing message out of today’s meeting is that the Fed remains on hold, barring any material upside surprises for inflation.

Technical Indicators

Overall, the bias in prices is: Sideways.

The projected upper bound is: 6,855.78.

The projected lower bound is: 6,570.45.

The projected closing price is: 6,713.12.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 33 white candles and 17 black candles for a net of 16 white candles.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 78.9487. This is not an overbought or oversold reading. The last signal was a buy 4 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 48.08. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 113 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -39. This is not a topping or bottoming area. The last signal was a buy 4 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 6 period(s) ago.

Rex Takasugi – TD Profile

S&P/ASX 200 closed down -43.800 at 6,708.800. Volume was 1% below average (neutral) and Bollinger Bands were 5% narrower than normal.

Open     High      Low     Close     Volume___
6,752.6006,753.0006,701.2006,708.800 630,712,640
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 6,731.54 6,703.23 6,536.02
Volatility: 19 14 13
Volume: 581,601,536 580,720,576 630,858,816

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

S&P/ASX 200 is currently 2.6% above its 200-period moving average and is in an downward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of .AXJO at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on .AXJO and have had this outlook for the last 6 periods.

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