Dollar Traps Bears
By Colin Twiggs
April 29, 2008 3:00 a.m. ET (5:00 p.m. AET)
Spot gold has penetrated support at $900 and is headed for a test of medium-term support at $870. Failure would signal a test of primary support at $775. Recovery above the recent highs at $950 would complete a double bottom reversal with a target of $1020.
Gold and the euro have moved in sync since 2006. Failure of support at $870 would signal dollar strength against the euro and other currencies.
June 2008 Light Crude is consolidating below $120 per barrel. Expect a retracement to test support at $108. Continued narrow consolidation below $120, however, would warn of an upward breakout.
The euro caught many bulls off-guard, with a second failed break above $1.59 followed by reversal to test support at $1.55. Failure of support would signal a test of $1.50. Reversal above $1.60, while not expected, would offer a target of 1.60+(1.60-1.55)=$1.65.
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The greenback is testing resistance at 105 yen. The short retracement to 103 is a bullish sign and breakout would indicate a test of the upper trend channel at 108. Reversal below 103 is less likely and would signal a test of 99, at the lower channel border.
The Australian dollar made a failed break above resistance at $0.95, falling to support at $0.93. Failure of support would test the lower border of the ascending triangle. Downward breakout from the triangle (below $0.92) would warn of a secondary correction. Reversal above $0.9550, while not expected, would offer a target of 0.95+(0.95-0.90)=1.00 (parity).
The Aussie continues in a descending right-angled broadening pattern against the yen, headed for a test of resistance at 100. Watch for a failed swing (that does not reach the opposite border) which would signal future breakout direction.
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