Dollar Finds Support, Gold Consolidates
By Colin Twiggs
September 24, 2009 8:00 a.m. ET (10:00 p:m AET)
The US Dollar Index is consolidating above short-term support at 76; a bullish continuation pattern. Breakout above the declining trendline is unlikely but would warn that the primary down-trend is weakening. The medium-term target for the current down-swing is 74*.
* Target calculation: 78.50 - ( 83 - 78.50) = 74
Spot gold is consolidating between $1000 and $1020; a bullish sign. Continued respect [R] of the new support level reinforces the signal. The weakening dollar also favors a primary up-trend. Breakout above $1020 would indicate a primary advance to $1100*. Failure of support at $1000 is unlkely but would warn of a potential bull trap. The long-term target for the breakout is $1300*.
* Target calculations: 1000 + ( 1000 - 900 ) = 1100 and 1000 + ( 1000 - 700 ) = 1300
The euro is testing short-term resistance at $1.48; breakout is likely and would signal an advance to $1.50*. Reversal below $1.44 is unlikely, but would warn of trend weakness — as would penetration of the rising trendline. In the long term, breakout above $1.50 would signal an advance to the 2008 high of $1.60.
* Target calculation: 1.44 + ( 1.44 - 1.38 ) = 1.50
The dollar continues its primary down-trend against the yen. Retreat from the lower channel border and penetration of the declining trendline both warn of a swing to the upper channel. Expect a test of resistance at ¥94. Upward breakout from the trend channel is unlikely, but would suggest a primary trend reversal.
The Aussie dollar continues to edge upwards against the greenback, despite weaker commodity prices. With short-term resistance at $0.88 and support at $0.85, expect retracement to test the lower support level before upward breakout to test the medium-term target of $0.90*. In the long term, breakout above $0.90 would offer a target of parity.
* Target calculation: 0.80 + ( 0.80 - 0.70 ) = 0.90
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