ASX Looks Like It Could Finally Break 7900

• The ASX 200 continues to pressure $AU7900.
• The risk appetite around the world seems to be picking up.
• Rates fall in Australia as ASX rallies
• Rally is broad based. 

The ASX 200 has been pressuring the crucial AU$7900 level for some time, but the area has been very stubborn to say the least. With the latest attempt though, there could be some hope of finally breaking out and clearing this hurdle.

Surge on Wednesday

During the Wednesday session, there was a decidedly positive spin in Oz, as the market gained well over $AU100, slamming into the resistance barrier. The market has seen several of the biggest Australian companies strengthen in general. The market has seen the RBNZ in Wellington hold rates, and with the statement, money had shifted quite drastically from New Zealand to Australia. 

Furthermore, the rally was broad and decisive. For example, the Commonwealth Bank of Australia rallied over 1% during the session, while CSL rallied 1.47%, and Wesfarmers Ltd gained 1.25%. This shows just how broad the buying was. While there were a few outliers, they were few and far between. The biggest one that comes to mind is ANZ Group Holdings, but it is worth noting that the “NZ” in that name is the biggest clue, as the Kiwis were one of the biggest losers overall in the session.

Money Flowing into Australia Overall

One of the biggest signs that Australia is going to be found in the FX markets. For example, the Aussie has rallied a full handle over the last 24 hours. The Aussie also looks as if it is really to take on the US dollar as well, and this would be a major sign of Australian strength. Money goes to where it is treated best, and Australia could be a major winner across the board.

Another sign of strength in Australia is that the 10 year bond is rallying in Australia, driving bond yields, showing signs that people are willing to step out on the risk spectrum, which should continue to benefit the stock market on the whole. However, it is more likely that the banks will be especially strong, as the interest rates spread on the bond spectrum could be a mover as well.

Going Forward

Going forward, it seems as though the trading public is going to try to reach out on the risk appetite spectrum, which could be a major boon for the commodity laden Australian economy. With central banks around the world cutting rates, or at least suggesting that cuts are coming, it is likely that people will go back to the playbook of buying commodities, buying “risk on” currencies such as the Aussie, and pour money into equities overall, which in theory, should allow the ASX to catch up with several other indices around the world. 

The Federal Reserve will also have its say, as traders around the world are watching to see whether the Americans will cut this year. Recently, we have seen a lot of chatter surrounding the central bank, as it will ultimately be the Fed interest rate policy that will give traders more confidence in owning assets such as stocks in places like Australia. 

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