By IFCMarkets

Australian dollar stopped falling amid slight increase in coal, steel, iron ore and some nonferrous metals prices. These commodities account for around 40% of Australian exports. The steel industry PMI in China rose 7.6% in April to 57.3% which pushed the demand for iron ore and coal up. Will the Aussie strengthen?

In China the metal industry PMI for April rose even more, by 10.6% to 60.4% having reached the high since March 2013. The iron ore import to China added 6% in first 4 months of 2016 to 325mln tonnes compared to the same period in 2015. On May 3, 2016 the Reserve Bank of Australia cut interest rate from 2% to 1.75%. This pushed the Aussie 5% lower in a month for the first time since July 2015. Now the majority of market participants do not expect the rates to be cut in at least 12 nearest months. This week some important economic data will come out in Australia: the Q1 GDP, the retail sales and trade balance for April. We believe the tentative outlook is positive.

On the daily chart AUDUSD: D1 stopped falling but is still in the downtrend. The MACD and Parabolic indicators give signals to buy. RSI is close to the oversold zone and has formed positive divergence. The Bollinger bands have widened a lot which means high volatility. The bullish momentum may develop in case the Aussie surpasses the last fractal high, 200-day moving average and upper Parabolic signal at 0.726. This level may serve the point of entry. The initial stop-loss may be placed below the Parabolic signals and the last fractal low at 0.714. Having opened the pending order we shall move the stop to the next fractal low following the Parabolic and Bollinger signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 0.714 without reaching the order at 0.726, we recommend cancelling the position: the market sustains internal changes which were not taken into account.

Market Analysis provided by IFCMarkets