Prospects of rise in met coal price turns Aussie bullish
On 21st March 2017, the RBA minutes were released that points towards an increasing risk in the housing market as a consequence of drop of the Australian Dollar against Yen. In addition to this, the US Republicans failed to repeal Obamacare and it further strengthened Yen and weakened the Greenback.
The currency pair AUD/JPY declined to a low figure of 83.76 after the price of iron ore dipped to a seven-week low figure of $82 per tonne. However, in the past two trading sessions, the currency pair has recovered to 84.80 levels because of lower than anticipated manufacturing and service PMI data from the United States. It is likely that the bullish reversal will continue in the near future and you can learn more about that from the arguments mentioned below.
The coking coal price is likely to increase sharply in the coming times because around 12 coal mines in Australia are shut down because of Debbie cyclone. Coking coal is a raw material used by the steel producers. The increasing price of coking coal will certainly favour the Aussies. The coking coal prices have fallen to approximately $150 per tonne from a figure of $308 per tonne as per data in November 2016. However, the prevailing prices are more than two times the traded price in February 2016.
Ricegrowers Association of Australia
The iron ore prices have fallen to approximately $80 per tonne after trading briefly near the psychological level of $100 earlier in 2017. According to analysts, the Chinese mills are slowly and steadily shifting towards the purchase of high-grade (62%) iron ore instead of low grade (58%). This kind of purchase has created a record inventory of low-grade iron ore at Chinese ports.
The high-grade iron ores are not much susceptible to volatility in prices. In addition, the cost of the iron ore in the Aussies mines is between $20-$30 per tonne. As a result of this, the current decline will have little or no impact on the Australian dollars.
In Japan, the consumer prices have increased at a lower rate of 0.3% year on year in February as compared to 0.4% earlier in 2017. Additionally, increased GDP growth rate of 2.1% in Q4 2016 has made the Greenback stronger after a small period of decline. The data is likely to keep Yen under a lot of pressure. On the basis of aforementioned facts, we believe that the scenario is in favour of the continuation of currency pair AUD/JPY rally.
The price chart shows a clear support to this currency pair at 84.90. The current uptrend is likely to continue because of the rising momentum indicator. The uptrend is also supported by the lack of any major resistance at current levels. So, as a trader, you can easily expect the cross to move up further and test resistance level of 86.60.
As a currency trader, you can purchase the Australian dollar in exchange of Japanese Yen near 84.80. In order to minimise any risk, you can place a stop order loss below 84.00. If you want to book profit, you can place an order near 86.60.
You can trade in the probable uptrend by investing in call option or its equivalent offered by any reputed binary options broker in the market. You can purchase the options contract when the currency pair is trading near 84.80 and choose expiry period around April 11th, 2017.
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