Australians head to the polls on August 21 and there will be implications for the Australian dollar.

AUD/USD has fallen in the past two sessions but has made a slight recovery so far on Friday.

The most likely outcome of the election is a slim majority for the incumbent Labor Party in the Lower House. If, however, the Liberal/National Party coaltion pulls out a win, we would see the Australian dollar rally. The coalition says it will scale back the proposed mining tax, something that will encourage more foreign investment and development in Australia. Bookmakers are suggesting a 75% chance of a Labor majority.

The big story will likely be the Senate.   The most likely outcome is that the main parties will split the vote and that the Greens  will holding the balance of power in the Senate. The Greens favour a more punitive mining tax which is something that will hurt AUD. The outcome, however, will be up for prolonged debate.

In forex,a big move normally follows an election, especially when the outcome is uncertain. The 100-day moving average at 0.8840 is critical support. A decline lower points to a further 200-pip fall. The failed rally on Thursday forms a bearish candlestick as well.

Trading around an election can be treacherous. Make sure your stops are in place.

North American markets got a big boost from news that BHP Biliton had proposed a $37 billion takeover of Potash Corp. The takeover suggests corporations are willing to invest and spend, something that has been up for debate. Companies have been hoarding cash, unwilling to hire or invest due to the uncertain economic environment. If the move by BHP is the start of a trend, it will signal growing corporate confidence in the worldwide economy – something that will boost AUD and CAD.

There is a downside bias as USD/CAD consolidates in a wedge formation. A drop below minor support at 1.0305 would point to further losses for the U.S. dollar against its Canadian counterpart.

For the Australian dollar, the candlestick patterns are bullish in the short-term but a buy signal won’t be confirmed until 0.9081 is breached. With Asian markets risk averse at the moment, there may be good value in establishing longs if AUD/USD drifts toward 0.9000.

AUD/USD had made a bullish breakout of the double-top at 0.8869 and appears poised for a test of the 200-day moving average.

Positive news out of China continues to boost the Australian dollar. Officials in China today upgraded output growth forecasts to 13% from 11% and said they will act to stimulate consumers in the second half of the year. In all the excitement about the German PMIs and U.S. corporate earnings today, these headlines have been overlooked except in the forex market. This is very good news for Australia as it ships much of its raw material exports to China.

Technically, this chart is now looking outright bullish.

In the short-term we will likely see a retracement close to 0.8869 in a classic ‘buyer’s remorse’ move. Afterwards, however, we expect a quick rally to the 200-day moving average at 0.8967 and eventually to the mid-May high of 0.9077. We can’t rule out a re-test of the cycle high at 0.9420.

The Australian dollar has made three strong pushes to the upside over the past three days after the RBA rate decision and better-than-expected employment data. Short-term signals are flashing some overbought signals but the move higher is generating bullish signals.

We can now see two clear double-bottom formations. One at 0.8062 adn one at 0.8314. In today’s trading we broke above downtrend resistance and AUD/USD is now squarely targetting resistance at 0.8861.

We feel as though we are late to the Australian dollar bullish camp but we can’t fight this chart. Some measure of consolidation is likely in the coming day but we will be eager to buy any weakness with an initial target of 0.8850 followed by a test of 0.9000 or the 200-day moving average.

On hourly charts, we have moved into highly overbought territory and that gives us some optimism that we will imminently see a pullback. On the daily chart, however, the RSI is under 60 and still has a great deal to run before we get into overbought territory.

Concessions from Australia’s government on a proposed mining tax gave a boost to AUD/USD but the moves were short-lasting, something that points to further Australian dollar weakness.

 Mining companies appear to be happy with the watered down legislation and that will contribute to steady investment in the coming years. AUD initially rallied on the reports but fears of a global slowdown appear to be outweighing the kneejerk reaction higher. The chart is also looking bearish.

AUD/USD has fallen from 0.90 to 0.84 over the course of ten sessions, so we are at somewhat oversold levels. We expected  a rebound to 0.86 but even with the good news about the mining tax we got only a rally to 0.8510, not even the 38.2% retracemenet of the down move.

On the short-term chart, we see a downtrend with 0.8509 as resistance followed by 0.8565. With a series of lower highs, we now see 0.8313 as a clear target early next week. Fundamentally and technically AUD/USD is looking bearish — sell any strength.

The Australian dollar rallied on Monday to the highest since May 19, breaking a above resistance and building a convincing double bottom that could point to a 500-pip rally.

AUD/USD took off right from the open of trading on Monday, steadily climbing to a high of 0.8667. It has since pulled back but the close of 0.8587 was above key resistance at 0.8552. The implications are undoubtedly bullish. We have outlined a double bottom formation that targets 0.9046. The measured target coincides with resistance points at 0.9024 and 0.9074. There is also the 200-day moving average to overcome (yellow) it sits at 0.9110 currently.

The first obstacles, however, will the 50-day and 100-day moving averages at 0.8816 and 0.8952 respectively. We don’t expect a clean break to the upside with the stochastics showing highly overbought signals.

Over the next few days we could see some consolidation but barring a sharp move to the downside, we see a gradual decline toward 0.9000.

We feel the Australian dollar has entered a medium-term downtrend and we want to use the strength in the currency late this week to establish a short position.

AUD/USD rallied in a wonderfully uniform fashion for six month starting in May 2009 and ending in November of the same year with a high just above 0.94. Afterwards we moved sideways for a period before the market broke down over the past month.

An initial drop culminated on May 5 before a short retracement phase. This week, we have seen a similar retracement, bouncing from 0.8066 to a high of 0.8555 today – nearly 500 pips. The rebound is precisely 50% of the drop from 0.9028 that began on May 13. It’s no surprise that AUD bounced to the key 50% Fibonacci level.

This gives us a great level to follow the downtrend but with minimal risk. We would initiate a short position on a fall below 0.8429, which is slightly below the 38.2% retracement level. Our stop would be at 0.8670. The initial target is 0.8100 followed by a much deeper fall toward 0.7500.

The interest rate hike from the Reserve Bank of Australia has led to a solid move higher in AUD/USD today. The rally has broken downtrend resistance that came into force in mid-December and touched of the January and March highs.

The technicals are now bullish and the downtrend should now be support, followed by the shorter-term uptrend and the 200-day moving average. Fundamentally, AUD/USD looks just as good with the RBA sending out hawkish signals. The RBA said: “At this point the market for established dwellings is still characterised by considerable buoyancy”. The comment is a thinly veiled attempt to address worries of a housing bubble. This will continue to remain a concern for the RBA.

Technically, the way is clear until 93.29, which was the January high. After that, a test of the cycle high of 94.02 is possible. It would be no surprise to see AUD rally to parity with the USD in the coming months.

The only fundamental concern we see in the near-term is from China, where officials are nearing a move to hike interest rates or the value of the yuan. Either of these events would trigger a sell-off in AUD.

Ideally, we would like to buy a pullback to 92.40 but there is a risk of missing the move altogether.

The Australian dollar has fallen to its lowest levels of the year but it’s very tempting to look for a way to get long.

AUD/USD broke below 0.8911 but touched off trendline support on the hourly chart and has since made a slight recovery. The hourly RSI has broken below support at 25 and is into severely oversold territory at 20.87.

In the short-term we expect to see an oversold correction but the trend is clearly down in AUD/USD.  The problem for Australia, despite bustling domestic economic growth, is that it is tied very closely to China. The market has recently turned against China after the PBOC took some steps to cool off the economy. A cooler China means a cooler Australia. Compounding the losses is the general risk aversion (stocks look ugly) and worries about sovereign credit.

Still, it’s hard to resist the temptation to catch the falling knife. AUD/USD has fallen in 8 of the past 9 sessions and the daily RSI is nearly as oversold as the hourly.

In the medium term, we would like to be short AUD/USD. Risk has been underpriced for months and it’s sure to come back. Not only that, there is a very clear triple-top on the daily AUD/USD chart and we don’t want to be agressively long until the top at 0.9402 breaks.

But if we had to make a trade in AUD/USD at the moment, it would be as a buyer. This pair is badly oversold by any measure. We see very little risk of a plunge in the pair and even if it did, we would be happy to get long at support at 0.8750. On the other hand, a snapback rally is very much on the table. Look to get long on a rebound to 0.9000.

We were taking a look at the hourly charts across the majors and this one stuck out.

We saw some very impressive moves last week and thankfully, we were here to offer some great trade suggestions. Every trade we highlighted last week was a profitable one and we’re looking for more of the same this week.

After the big breakdowns last week, we’re looking for some signs of retracement. We like AUD/USD because in the panic last week, a lot of Aussie positions would have likely been tossed out with anything else that looked like ‘risk’.

Now that the market has settled somewhat, the focus will shift back to fundamentals and Australian has the best fundamentals of any advanced economy.  We are aware of the upcoming Australian CPI data and we warn that the risk averse would be wise to trade around it as it has the potential to whipsaw the market.

Back to the chart…. To us, this looks like it could be the beginning of a nice short-term trade with very limited downside.

We have drawn in support from the recent lows and we note that we have seen three (or even four) consecutive higher lows. We also like the look of the reversal candelstick bottoming just below 0.9000. We have yet to see a higher high but we are encouraged that the market didn’t break down after a clear double-top at 0.9092. The market looks poised to test 0.9092 once again and if it breaks, we can see a quick run to 0.9145 (at least).  On a short-term trade, we wouldn’t risk more than the trendline shown but AUD bulls might put a stop at 0.9000.

In the medium-term, we’re still bearish on AUD but with think there’s the potential for a quick, low-risk trade here.