ASX 200 Outlook Stuck on Monetary Support As Coronavirus Cases Increase

AUSTRALIAN FISCAL POLICY, CORONAVIRUS LOCKDOWN RESTRICTIONS, ASX 200 – KEY POINTS:

  • As ASX 200 continues to struggle to break the key Fibonacci resistance as the technical divergence recommends a leg lower might be important.
  • Uncertainty surrounding the future of the monetary policy measures can weight heavily on regional risk assets.
  • Australia’s Melbourne high number of the 2nd wave of COVID-19 cases might hurt the country’s tentative recovery.

Australia’s 2nd Biggest City Put Under Phase 2 Lockdown As Coronavirus Cases Rise

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The latest surge of COVID-19 cases in Melbourne’s suburbs has necessitated the need the re-impose the citywide stage 3 lockdown in Melbourne, for six weeks.

As of today, the predicted costs to the local government is $1 billion per week, the measures are without a doubt not take lightly as the Victorian premier, Daniel Andrews regrettably apologized for the state found itself in such a vulnerable position while stressing the adverse effects of getting this lethal virus and succumbing to it.

The Australian shares market fell further early this week as rising cases of Coronavirus infections in Melbourne and around the globe, hit trader sentiment.

The benchmark ASX 200 only closed at 6,015 (0.7%) or 43 points lower.

With the state contributing about ¼ of Australia’s economy, Josh Frydenberg, who is the treasure stated that the latest setback is serious jeopardy to the country’s recovery as a whole and not only victoria.

Recent COVID-19 Statistics

ASX-200-Outlook

Nevertheless, the treasure remained silent despite coming under lots of pressure to reveal the outlook of the financial landscape after September, vaguely indicating that another stage of the support will be directed to the vulnerable citizens who need it most.

Having announced that more than $260 billion in fiscal support that accounts for about 13% of the nation’s GDP, supplementary measures might not be as vibrant as it was initially expected. The government is also looking for alternative ways to implement (proportionate, scalable, targeted, and temporary) measures to deal with the difficulties that Australia is currently facing.

That said, state sentiments might remain focused on the local COVID-19 concerns before the upcoming economic address on July 23. The premier, Scott Morrison is expected to partially meet the trader’s expectations for extra fiscal stimulus.

Failure to do this will possibly catapult risk aversion, eventually repressing the latest rally as seen with the ASX 200.

Furthermore, ASX 200 continues struggling at key psychological Fibonacci resistance 6,124 (61.8%) as fading basics make it more difficult for the Australian benchmark index recovery from the previous low (4,387) experienced in march.

ASX 200 Chart

ASX-200-Outlook-Hinges-bullish

The sustained correction lower seems reasonable with the failure of the Relative Strength Index to follow the price higher. This is an indication of exhaustion in the latest rally from the 5,792 Fibonacci (50%).

The daily close under the psychological imposition of 6,000 might trigger additional selling with the hampering of support at 50-day MA (5,767) possibly carving the path back to 5,589, which was Aprils high. Don’t forget to read through Australian Dollar Rises as Rates are Kept Steady by the RBA.

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