The ASX 200 index slumped to its lowest level this month as investors reacted to signs of rising U.S. unemployment and the sharpest decline in the country’s GDP since 1947.
The GDP in the U.S. contracted by 32.9% between April and June, a 70-year low albeit this was slightly lower than analyst predictions of 34.1%. As a result, jobless claims rose for a second straight week, reaching 1.43 million, adding to investor worries that recent economic recovery efforts are stalling as the number of Coronavirus infections are on the rise in the U.S.
Amid the jump in COVID-19 cases, the Australian entertainment sector dropped, while the country’s energy sector is under selling pressure after a sharp decline in crude oil price.
Moreover, fresh economic data in Australia failed to impress investors. The Australia Producer Price Index – covering the the second quarter – reported a dip of 1.2%, below earlier forecasts of 0.3%. Meanwhile, the yearly reading of the Producer Price Index (PPI) came in at -0.4%, well below market expectations of 1.3%. Finally, the Private Sector Credit for June came in at -0.2%, again below earlier estimates, in this case of 0.2%.
Investors seemingly ignored relatively positive economic data from China, Australia’s largest trade partner. China’s Manufacturing PMI hit 51.1 in July, topping forecasts of 50.7.
ASX 200 daily technical analysis
The ASX 200 finished 2.04% lower – at 5,927 – as the 200-day moving average proved a strong resistance, as mentioned in our latest analysis: ASX 200 Upside Capped at 6,211. Today in the technical sphere, the daily chart point to a negative development as the index closed below the 50-day SMA moving average for the first time since mid-May.
The technical outlook is bearish now, and lower levers might be on the cards. Initial support for the ASX 200 index stands at 5,893 the weekly low. Next support area for the index would be met at 5,778 the low from June 29. Patient bearish traders might wait until the index breaks below the 100-day moving average at 5,605.
Bulls are looking for a return above 5,941 – 50-day SMA – while the next strong resistance would be met at 6,051 the daily top. For one more time, the 200-day moving average at 6,201 is the next obstacle for the ASX 200 index.
ASX 200 Daily Chart