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Analysis and forecast. Main fundamental factors.

July 16, 2020

July 16, 2020

Fundamental and technical analysis of ASX200Mikhail Hypov

Fundamental and technical analysis of ASX200

Today we’re examining Australia’s stock index ASX200. It embraces 200 biggest companies of Australia whose total capitalization exceeds 80% of the stock market. The specifics of this local market are closely related to the specifics of the Australian economy. Today we’re going to forecast  ASX200’s cost, provide its technical and fundamental analyses and examine its wave structure. We will also compare the index with other global stock indexes and determine its key levels and actual scenarios.

By the way, the official name of Australia is the Commonwealth of Australia, but the unofficial name popular with the Australians themselves is Land of Oz or just “Oz”. Also, there are many other nicknames such as:

New Holland

Straya

the Land Down Under

the Great Southern Land

the Lucky Country

the Sunburnt Country

Ulimaroa

These numerous nicknames can be explained by the fact that Australia lies far away from the Western world. The big distance and hard access to its territory made Australia even more attractive and mysterious, and spread lots of legends and rumours about that faraway Land of Oz. However, Australia’s location turned out to be beneficial in the current pandemic circumstances.

![LiteForex: ASX200: Analysis and forecast. Main fundamental factors.][1]

Epidemiologists would unanimously predict another pandemic wave worldwide, and it seems to have already started in Australia if you look at the chart above. But at a closer look, the ratio of Number of deaths to Number of new Covid cases is less than the one registered during the first wave. It is a good factor which means that the government and the population have managed to set up some efficient ways of combatting the disease. The latest statistics on coronavirus are rather encouraging: a large scale lockdown may not be necessary and the Australian economy may avoid another stress test.  However, besides important domestic factors, there are some external ones that may affect the behaviours of indexes. The Australian economy’s peculiarities have already been discussed in one of my previous [articles][2]. I will only remind you that the economy of Australia is based on resources. This fact is clearly reflected in the composition of the [ASX200][3] index. Almost 20% of the companies are directly connected with production of raw materials and they account for 20% of capitalisation as of 1 June 2020 according to [asx200list.com][4]. Another important factor which influences the state of the index is macroeconomic stats from Far East and South Asia.  In the first place, I mean China and Hong Kong that import 40% of Australia’s production.

Fundamental surprises aren’t expected either. Since China remains the only country that will keep its GDP growth in the positive zone according to IMF, the general forecast is positive. But the Chinese government itself holds off making an economic forecast for the second half of 2020, which means China fears the consequences of the second coronavirus wave.

After all, Chinese macroeconomic figures may be doubtful considering the alleged cover-up of the epidemiological situation on the eve of the global pandemic.  Those rumours are still being discussed by the US government and Donald Trump personally. Political engineers say that confrontation with China will be at the top of the agenda in the upcoming electoral cycle. The US presidential election scheduled for 3 November 2020, we are expecting 3 tense months where Trump may worsen the US-China relations with a couple of tweets. Obviously, the Australian market is sensitive to that confrontation and every new round may hit hard the sentiment of the Australian stock market.

Global technical analysis of ASX200 index

Now that we’ve examined the fundamental factors let’s have a look at the technical component. I don’t know why but the index ticker is XJO. If you’re a LiteForex trader, you will easily find the index as [ASX200][3]. As usual, we will check the global history of the index movement first.

![LiteForex: ASX200: Analysis and forecast. Main fundamental factors.][5]

It’s displayed in the 12-month chart above. At the macro-level, we see a stable bullish trend - the orange trade range - that even the current crisis failed to break. It’s a good factor for a future long-term growth. However, the current slump broke a local bullish trend which started in 2009. The same situation concerns any other stock index, but it’s a bad sign from the point of view of technical analysis.![LiteForex: ASX200: Analysis and forecast. Main fundamental factors.][6]

The ultimate candlestick’s long shadow gives rise to a movement in the area of 4,600-4,700. So technically, nothing can prevent an attempt to return to the previous minimums at this macro-level.

Analysis of ASX 200 G35

![LiteForex: ASX200: Analysis and forecast. Main fundamental factors.][7]

If we [express][8] the ASX200 index in terms of the 1971 Gold standard, the situation looks sad: we can observe a regular fall instead of a growing trend. It indicates the fatal depreciation of the stock against gold.  The ultimate candlestick in the 6-month chart above points to the continuing downtrend of  [ASX200 ][3] relative to the gold standard. Thus, the index shouldn’t be expected to grow on the “long” money of institutional investors in the nearest time. This situation rather indicates a speculative nature of the index price’s recovery and confirms the fear of a probable future correction. To analyse those fears thoroughly, we will compare the evolution of the [ASX200][3] index with S&P500 and Shanghai Composite. We will also draw global and local wave structures, determine the key levels and make a global, medium-term and short-term scenario for [XJO][3]’s future movements.

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I’d like to remind you that all materials are provided for educational purposes only. They aren’t financial advice and don’t guarantee any profits. All trading decisions you make are your responsibility only.

Good luck and profits, everyone!

Yours,

Michael @Hypov

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Ask me questions and comment below. I’ll be glad to answer your questions and give necessary explanations.

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Price chart of ASX200 in real time mode

![Fundamental and technical analysis of ASX200][11]

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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  1. cdn.liteforex.com/cache/uploads/blog_post/cryptocyrrency/hyipov/2020.07.16/COVID-19_AU_hypov_1.jpg?w=30&s=bbb9be044e9622b529c233333565906f
  2. www.liteforex.com/blog/analysts-opinions/audusd-fundamental-and-technical-analysis-short–and-long-term-forecasts/
  3. my.liteforex.com/trading/chart?symbol=ASX200&returnUrl=true
  4. www.asx200list.com/
  5. cdn.liteforex.com/cache/uploads/blog_post/cryptocyrrency/hyipov/2020.07.16/ASX200_hypov_2.jpg?w=30&s=a70077e33358eb28e6f737e189ab51e7
  6. cdn.liteforex.com/cache/uploads/blog_post/cryptocyrrency/hyipov/2020.07.16/ASX200_hypov_3.jpg?w=30&s=73124dc19883bf347c30ebbd027575b2
  7. cdn.liteforex.com/cache/uploads/blog_post/cryptocyrrency/hyipov/2020.07.16/ASX200_G35_hypov_4.jpg?w=30&s=d5b43a5bd1f05ed5d7633f457960d943
  8. www.liteforex.com/blog/analysts-opinions/g35-asset-valuation-method-through-the-example-of-sp500/
  9. my.liteforex.com/?category=analysts-opinions&slug=fundamental-and-technical-analysis-of-asx200&openPopup=%2Fregistration%2Fpopup&utm_source=blog&utm_medium=article&utm_campaign=bonus
  10. my.liteforex.com/deposit/?category=analysts-opinions&slug=fundamental-and-technical-analysis-of-asx200&promo_code=BLOG&utm_source=blog&utm_medium=article&utm_campaign=bonus
  11. cdn.liteforex.com/cache/uploads/blog_post/cryptocyrrency/hyipov/2020.07.16/ASX200_hypov_logo.jpg?q=75&w=1000&s=8b3b32338dcea3e2cc2c1f7cdc6564f0