Dollar Spurs Gold Advance
By Colin Twiggs
January 14, 2010 9:30 p.m. ET (1:30 p:m AET)
The US Dollar Index retraced to test support at 76.6. Respect of the support level would confirm the primary up-trend — look for confirmation from a rise above 77.3 and/or Twiggs Momentum Oscillator (5-day) recovery above the declining trendline. In the medium term, breakout above 78.4 would signal an advance to 80*, while failure of support at 76.6 would warn of trend weakness.
* Target calculation: 78.4 + ( 78.4 - 76.6 ) = 80.2
Gold rallied in response to the weakening dollar — following a bullish divergence on Twiggs Momentum Oscillator (5-day). Today's recovery above resistance at 1140 after a brief retracement is a positive sign and breakout above $1160 would confirm an advance to $1200*. Reversal below the rising trendline, however, would test support at $1080.
* Target calculation: 1140 + ( 1140 - 1080 ) = 1200
The euro is consolidating below resistance at $1.46. Breakout would signal an advance to $1.50*, but respect of resistance, signaled by Momentum reversing below zero, would warn of another test of primary support at $1.42.
* Target calculation: 1.46 + ( 1.46 - 1.42 ) = 1.50
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The greenback warns of a correction against the yen, having reversed below the rising trendline following bearish divergence on Twiggs Momentum Oscillator (5-day). Failure of support at ¥ 91 would confirm; signaling a test of ¥ 88. Recovery above ¥ 93, however, would indicate another primary advance.
The Aussie dollar recovered from its recent correction and is testing resistance at $0.93. Brief retracement [v] at the resistance line is a bullish sign and breakout above $0.93 would offer a target of $0.98*. Reversal below $0.92, however, would indicate further consolidation.
* Target calculation: 0.93 + ( 0.93 - 0.88 ) = 0.98
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