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Gold Breakout As Dollar Weakens

By Colin Twiggs
October 8, 2009 0:05 a.m. ET (3:05 p:m AET)

These extracts from my trading diary are for educational purposes and should not be interpreted as investment or trading advice. Full terms and conditions can be found at Terms of Use.



The US Dollar Index is testing short-term support at 76; failure would signal a down-swing to test 74*. Recovery above 77.50 is most unlikely, but would indicate that the primary down-trend is weakening.

US Dollar Index

* Target calculation: 78.50 - ( 83 - 78.50) = 74

Gold

Spot gold spiked upwards to test short-term resistance at $1050; breakout would offer a target of 1100*. The long-term target for the current advance is $1300*; failure of support at $985 is most unlikely, but would warn of a potential bull trap.

Spot Gold

* Target calculations: 1000 + ( 1000 - 900 ) = 1100 and 1000 + ( 1000 - 700 ) = 1300

Euro

The euro is headed for another test of resistance at $1.48; breakout would signal an advance to $1.50*. Reversal below $1.45 is unlikely, but would warn of a weakening up-trend. In the long term, breakout above $1.50 would signal an advance to the 2008 high of $1.60.

Euro US Dollar

* Target calculation: 1.44 + ( 1.44 - 1.38 ) = 1.50

Japanese Yen

The dollar broke out below its trend channel against the yen. Expect a test of the 2008 low of ¥87. Breakout above the declining trendline would warn of reversal to test the upper channel border — and resistance at ¥94.

US Dollar Yen

Australian Dollar

The Aussie dollar broke out of its widening formation against the greenback, penetrating the key resistance level of $0.90. Expect a retracement to test the new support level, but the long term target is parity*.

Australian Dollar US Dollar

* Target calculation: 0.90 + ( 0.90 - 0.80 ) = 1.00

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