Australian Banks 4 Charts

During the past 2 months, Westpac, AMP, MQG, BOQ and NAB have raised interest rates as there are increasing wholesale funding cost pressures on banks. So while the Reserve Bank of Australia might have official interest rate level on hold for some time to come, the banking sector is proceeding to raise rates to cover immediate funding costs.

Over the past 5-8 years banks have raised capital to meet Tier 1 regulatory requirements and are well capitalised against an economic turndown.

In part, pressure is coming onto the banks from a falling Australian dollar exchange rate, this will have a two edged sword effect, a lower Aussie will lift the cost of imports but that is far from unwelcome when inflation has been stuck below the RBA's target band for 2-1/2 years running. Indeed, the RBA is thrilled by the fall, having spent the last couple of years trying to talk it down to little effect. That feel-good sentiment was evident in comments made by RBA Governor Philip Lowe in a speech last week. "The Australian dollar has depreciated. If sustained, this could be expected to improve the outlook for both inflation and growth."

Are the banks raising interest rates in a low inflation economy with minimal wage growth, and facing some uncertainty with current financial inquiry underway, is this a place to invest or trade? What do the charts say? Are they a BUY or SELL?

When you consider the recent sell off in financials, traders and investors would be eagerly waiting for signs of an oversold low, let’s take a look.

The first technical observation is the Weekly chart, this is where primary price trends are identified with the daily chart a way of looking for trading signals into the primary move.

In no particular order.

The ANZ Weekly chart highlights resistance at $30.60. There is no defined trend between July and the current week. The 2 Key reversal candles are showing the sellers taking advantage of higher prices. A weekly close below current support at $28.00 would bring the lower $26.00 support level into play. A bullish view would only take place with a weekly closing price over the resistance level of $30.60.

ANZ Daily chart shows early signs of price recovery, the key reversal day at the $28.0 support level is positive for higher prices. Relative strength remains below the key “50 level”

Westpac Weekly chart shows a primary down trend in place, the most recent retest of the $30.30 has resulted into a key reversal candle to test the lower $27.20 support level. The current price ranges are small compared to recent weeks, a breakdown below support at $27.20 would see the primary down trend resume.

WBC Daily chart clearly defines the support resistance level with a current breakout of the descending line. RSI remains below the key “50” level.

The most defined Weekly chart is Commonwealth Bank, showing a Primary down trend in place.
Current support at $70.00 is now the key level to hold in coming weeks. The trend line (1) and (2) s regarded as only “tentative” requiring a 3^rd touch to confirm.

The daily chart of CBA has a descending triangle, with a potential move over $72.00 being bullish in the short term. RSI is swinging higher, but remains below the key “50” level.

National Australia Bank, in line with the sector, also displays a Primary down trend. Clear support at $27.20 and resistance at $29.0 is shown in the primary down trend. For the past 12 months the outside range has marked and held the major turning points. A breakout over the resistance of $29.0 is required to instigate a new Primary up trend.

The Daily chart of NAB remains bearish, with a potential breakdown below the $27.20 support level.

In summary the 4 major Australian banks remain in trading ranges and position sizing with appropriate Stop loss points should be used with regard to account size. The price ranges of recent weeks is small, but this type of low volatility can lead to high volatility in future price movements.