Gold & Euro Await Another Cut
By Colin Twiggs
January 29, 2008 10:00 p.m. ET (2:00 p.m. AET)
Gold, the euro, and crude all rallied after the Fed cut the funds rate to 3.5% on January 22. Expect further demand if the January 30/31 FOMC meeting makes additional cuts.
Spot gold rallied off support at $850 and is likely to reach a target of $950. Any (short/medium-term) retracement is likely to find support at $900. Primary support remains at $775 and is unlikely to be tested.
June 2008 Light Crude responded to the stimulatory measures announced by the Fed and the government, respecting primary support at $86/barrel and advancing towards another test of $100. Failure of support at $86 is not expected — and would warn that crude has started a primary down-trend.
The euro is consolidating in a large symmetrical triangle below resistance at $1.50. Downward breakout, below $1.4350, would warn of a primary down-trend; while a rise above $1.49 would mean another test of the key psychogical level of $1.50. In the long term, breakout above $1.50 would offer a target of $1.57, but there may be a few false breaks (feints) ahead of the real breakout.
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The dollar continues in a downward trend against the yen. Consolidation near the lower border suggests another bear rally; so watch for a rise above 108. The long term target for the down-trend remains at 100.
The Australian dollar is struggling with resistance at
$0.8900 against the greenback. We have already seen one false
break, so breakouts are not to be trusted unless confirmed by a
retracement (that respects support at $0.8900). A rate rise by
the RBA would boost demand for the Aussie.
The Australian dollar also successfully tested long-term support at 90/86 (the intra-day low was 86) against the yen. Failure of this level would warn of unwinding carry trades and offer a target of 90 - (107 - 90) = 73.
The history of fiat money is little more than a register of
monetary follies and inflations. Our present age merely affords
another entry in this dismal register.
~ Hans F. Sennholz
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