The biggest news developing over the weekend was the election in Australia. Neither of the candidates, the Prime Minister Julia Gillard, nor the opposition leader Tony Abbot, gained the majority in yesterday’s vote. This is the first time in 70 years that general election did not produce a majority government. The prospect of hung parliament is creating uncertainties about pending reforms and a possible shift toward less business friendly government. While mailed votes are being counted, a process which could take day, Australian bookmakers favor odds for Tony Abbot. One can place bets on the outcome.

Last week Australian Dollar lost some ground against most currencies. In a rather unanimous opinion, analysts and reporters blamed it on, at the time, the prospect of inconclusive election. The prevailing sentiment on Sunday is to see weakness in the Aussie at the open. Of course, this is all a guess, and not worth placing trades right at the start of trading. However, all this talk about slumping AUD last few days is a little exaggerated. After all, this currency made gains on Friday, rising during entire US session. Even though in most cases the Aussie did not close at high levels for the day, the last moves before the weekend were bullish.

Tuning out the election speculations, I’m looking for similar plays to the ones made last week after the open. If the Aussie bullish trends continue, as seen on hourly charts, reversal candlestick patterns will be signals to enter trades in opposite directions. This should happen 4-6 hours after trading starts. Details will be worked out when, or if,  the set up emerges.

The Euro-Aussie pair looks even more interesting in this context, because it is approaching an important support level, increasing a probability of reaction around 1.4190 or so. And GBP-AUD cross is on the watch lst as well. On the other hand, if the media is right and the Australian Dollars falls from the start, gaps could develop. These are always trading opportunities, even though not too frequent recently. Same for the Japanese Yen. One can expect more intervention innuendos and noise on the subject, leading to possible opening gaps.

Mike K.