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.

AUD/USD looks tired and Friday’s non-farm payrolls report could be just the thing to stomp out the fading rally.

We saw a 100 pip intraday reversal on Thursday and that has set up an inverted hammer pattern.

We also draw your attention to the slow Stochastic, which is deep into overbought territory with the signal line threatening to cross over.

By any measure, AUD/USD is overbought. We have seen a rise in 8 of the past 12 sessions and all the down days were negligible until Thursday.

The short-term chart also looks like it’s setting up for a big move.

We’re seeing a classic consolidation pattern after a sharp reversal. The range is very tight at the moment, with 0.9180 and 0.9160 as the parameters. Any break is a short-term ‘go with’ but on the top side we would take profits quickly and look for a level to be a better seller. On the bottom, we would hold on through Friday’s non-farm payrolls and look to hit a home run as AUD/USD falls back to 0.8750 or lower.

The Australian dollar has rallied nearly non-stop for the past seven sessions but the move is about to hit some roadblocks, namely the 38.2% Fibonnaci retracement of the five-week move lower and psychological resistance at 90.00.

AUD/USD has cleared several hurdles on its rebound, including the lows of the old range at 0.8919 and 0.8946. This is a positive indication for the pair and shows that 0.94 may still be in play.

The key resistance levels are the Fibonacci ones — 0.38.2%, 50% and 61.8%. They fall at 0.8992, 0.9071 and 0.9150. If 91.50 is cleared we believe a re-test of 0.94 is likely. Another level that could offer some resistance is the 50-day moving average at 0.9104 currently but in the past the 50dma has been neglected.

We would like to see a close above 0.90 to confirm a contiued bullish trend but after such a run-up we believe a pullback is the most likely scenario. Expect 0.8916 to act as support, if not a slide back to 0.8750 and below is likely.

Have a Happy New Year.

The Australian dollar was the worst-performing major currency over the past day. It fell 114 pips to 0.8788.

The Aussie dollar had touched above 94 cents in mid-November but soon began to struggle and has now fallen more than 400 pips in the past week.

The long-term technical picture now looks bearish.

The uptrend has been broken and how the 100-day moving average (red) has been breached.

The recent declines in AUD come after the Reserve Bank of Australia said it could introduce a pause to its interest rate hiking cycle. This shook out some of the carry trade. At the same time, there has been a rally in the U.S. dollar based on short-covering and improved expectations for rate hikes in 2010.

The technical picture for AUD/USD looks perilsome at the moment. Some oscilators are showing that the pair is oversold but that’s to be expected in this sort of environment.

The initial target of the breakdown is the September low of 0.8568.

Looking at this four-hour chart, you can certainly make a case for extended declines. The measured target of the break below support is 0.8206 which falls roughly in line with the 200 day moving average of 0.8260.

Is AUD/USD ready for another push higher?

This chart has tended to overshoot in the past before a swift move higher. The trendline has been tested four times in the past. It has rallied virtually every session (14 out of 16 days, with two minor down days) in the four sessions following a failed break. The average gain in the four days that follows a failed break is slightly more than three cents.

On factor that raises some concerns is that the daily Bollinger hasn’t tested the lower band like in other instances. This raises the possibility of a further correction.

On the hourly charts, we see further reason for guarded optimism. Since the peak at 94 cents on Nov. 16, the rebounds have followed a similar pattern with a rebound to the 61.8% and 38.2% Fibonacci levels. The most recent decline has already rebounded above the 61.8% level, suggesting a 100% retracement to 0.9210.

With this sort of scenario in mind, a short-term trader may wish to go long AUD/USD now, risking no more than 0.9100 with a target of 0.9200. After that target is achieved wait for any pullback to establish new AUD/USD longs, never risking more than 0.9100.

XAU/USD

Gold prices reached an all time record high yesterday. Gold trading is currently on the rise and continues in that direction with an increase of about 5% to the price of $1037 an ounce. The previous record price of gold was recorded in March 2008, when gold reached the price of $1032 an ounce.

Gold is becoming more attractive to buyers as the USD continues to drop. The price increase of the gold can be seen when looking at the CAD/USD, AUD/USD and NZD/USD. Those pairs are what some call commodity effecting pairs and they continue to indicate the weakening of the USD.

This is an exciting time for us as traders as we are witnessing record high for the gold and the unprecedented weakening of the USD.  We talked about the G7 meeting that happened over the weekend yesterday and I will continue to wait and see the outcome of that joint statement since the market is continuing with the technical trend and ignoring some of the fundamental news coming out as of late.

By the way yesterday we talked about the USD/CAD below you will see the results of the pair over the trading day. Needless to say the fundamental news had some affect on this pair.

Fundamentals:  We have a few announcements today that will affect the market.

Coming from Europe we have the “Final GDP”.  The previous announcement was -0.1% and the forecast for today is -0.1%. Released at 9:00 GMT.

Two  more announcement coming are also expected. One from the EU being the “German Factory Orders m/m” which will be released at 10:00 GMT, the previous announcement was 3.5% and the forecast for today is 1.3%. Also coming from US we have the “Crude Oil Inventories”. The previous announcement was 2.0M; the expectation is at 2.8M this will be released at 14:30 GMT.

AUD/USD

It‘s not the first time that we are talking about this great pair.  The thing about this pair that makes it so exciting is that every few weeks, days or hours this pair is breaking the previous record and moving in a uptrend. Take a look over the daily chart and you will clearly see the trend this currency is moving in. Over the last year we have seen that this pair has moved in the 2600 pips range and in a clear uptrend. Now the big question I hear everyone asking is when and will this pair will really break the record and prove this uptrend to be real and reach the highest point of 0.9400?

In order to get the feeling of the movement you will need to take a look at a few different parameters, one is the fundamental news that will come from the US and Australia that will directly affect the move and trend of this currency.  Next thing to do is keep looking over the chart and to technically analyze the trend of this pair over non fundamental days where only sentiment will effects its movement.  The combination of both will help you make the right decision when trading. Over the last few weeks the market has moved nicely for this pair, let’s go ahead and translate today’s movements to money in our pockets!

Fundamentals:  We have a few announcements today which will affect the market.

Coming from United Kingdom we have the “Services Purchasing Managers’ Index”. The previous announcement was 54.1 and the forecast for today is 54.6. (08:30 GMT).

Two more announcements are also coming in. One from the US “ISM Non-Manufacturing PMI” which will be released at 14:00 GMT, the previous announcement was 48.4 and the forecast for today is 50.  Also coming from New Zealand we have the “Business Confidence”. The previous announcement was -25. (21:00 GMT), no forecast on this one available.