The news is that there is no news. We’re still stuck in the horse-trading pen and it looks unlikely that we’ll have any result this week.

The independents had asked both parties to present their policy costings to the Australian Treasury for assessment. The Liberal opposition initially refused and now we know why. Treasury found an AUD$7 billion gap in their costing estimates. Ah politicians, at least you know where you stand with them.

AUD/JPY is 1.5% higher on the day but a quick look at the daily chart shows us that this pair is still roughly in the middle of a consolidative wedge pattern with parameters at 73.50 and 78.50. Having stalled at a major 61.8% level at 88.00 and then initiated a downtrend, this wedge pattern is expected to break lower rather than higher over the next few weeks. The bearish long term MAs would also suggest more downside.

This backs up the earlier official PMI figure.

AUD/JPY as the main magnet for risk trades in Asia is trading at intraday highs.

AUD/USD was the big mover on Friday night and it has continued on in the same vein this morning, tripping stop-loss buy orders above .9010. Interbank dealers say that there are more stops placed above recent highs at .9080 and they may come into play later, depending on what the BoJ does and it’s effect on the JPY crosses.

On the election front, there has been no significant progress made in the formation of a new government and it is likely to stay that way until the end-of-the-week at the earliest.

The predominant opinion among the local interbank players is that selling AUD on rallies is the safer trade. They’re suggesting that either selling AUD/USD or buying EUR/AUD is the best way to go. Nobody seems willing to play too hard in the JPY crosses at these levels so they’re leaving AUD/JPY alone.

They usually base their opinions on weight of market flows and also on potential risk events.

EUR/JPY, GBP/JPY and AUD/JPY are all trading towards their session highs, up 50 pips on the session as Tokyo once again ignores the short-term trend from overnight and decides to book some profit.

The next levels to watch topside are; the previous lows at 107.30 in EUR/JPY and 84.75 in USD/JPY.

The bottom of the consolidative wedge pattern comes in around 73.40 and a clean break below there, and especially below 72.60, will confirm that the downtrend is back in control. Shorts definitely preferred on a medium term basis but I prefer to wait for the break lower or else sell rallies.

AUD/JPY is currently testing hourly support at 75.40. The next level below here is a daily low at 74.60.

Japanese investors tend to be long AUD/JPY and the question now is whether the hung parliament here in Australia is likely to frighten them out of their carry-trades. As can be seen on the attached daily chart, the pair is in a medium term consolidation between 73.25/78.75 and we are close to the middle of this range at the moment.

All we know at this stage is that a hung parliament seems assured and that Australia faces a week of political uncertainty. Now what remains to be seen is whether the big speculative players decide to try and aggressively sell the AUD. What we should keep in mind is that the most likely outcome at this stage is a Liberal Party victory with support from a few moderately right-wing independents. Before the election, a Liberal victory was seen as being a defeat for the mining tax and therefore a positive for the AUD, so even if the AUD gets sold, it may rebound quite quickly if/when a new Liberal Government is installed.

From a trading strategy perspective, playing the short side whilst the AUD/USD is below .9080 would seem like the sensible thing to do, at least early in the week. With uncertainty in the air, selling at any price is definitely not advisable, but don’t be surprised if the market opens below 88 cents on Monday.

Again, a lot will depend on whether the big speculative players try to take advantage of the political uncertainty. With the AUD at quite high levels against many of the other major currencies, my feeling is that they may well try and do so.

• 1
• 2
• 3
• 4
• 5
• ...
• 45
• >