Good morning Forex Kings,

We have been waiting for this set up to provide a bearish signal for just over a week and we are pretty excited about the analysis!

The technicals appear to have now flashed in the favour of our trade set up.

Fundamental Analysis

Coronavirus continues to spread with over 80 deaths in China and over 2700 infected cases. The AUD and global indices have suffered as a consequence of the outbreak. The Dow Jones has dropped almost 1000 points, the ASX is expected to follow Wall Streets sell off. With Australia being in a public holiday yesterday there was minimal volume going into the ASX. Therefore there could be further downside today.

The chances of an interest rate cut from the RBA next month has fallen due to more positive data coming from Australia. The ASX has rallied whilst the RBA have continued to cut rates. Indices prefer lower interest rates, therefore we could see a sizeable pull back as the market will price in an interest rate hold.

Technical Analysis

ASX – Weekly charts

There is a bearish divergence on the RSI after the market hit new highs, this is a bearish signal. Secondly, the ASX has been rejected from the inclining channel followed by an inclining wedge formation.

ASX – Daily charts

Trade Set Up: SELL Market Order  (AUS200) – Stop loss 7250, take profit left open, however we are targeting 6600 and 6400. 

Stop Loss – 266 Points (PIPS)

Don’t forget to check the specification/details on the ASX. 1 contract = $1. Therefore a stop loss of 266 PIPS = $266 for 1 contract.