Dollar Rally Weakens Gold & Crude
By Colin Twiggs
January 21, 2010 2:00 a.m. ET (6:00 p:m AET)
The US Dollar Index is testing resistance at 78.5. Breakout would signal reversal to a primary up-trend — and advance to 80*. The shallow trough (1%) on Twiggs Momentum Oscillator (5-day) also favors an up-trend. Reversal below support at 76.6 is unlikely, but would warn of test of primary support at 74.
* Target calculation: 78.4 + ( 78.4 - 76.6 ) = 80.2
Gold retreated below short-term support at $1120 after breaking the rising trendline on the price chart and on Twiggs Momentum Oscillator (5-day). Expect a test of primary support at $1080. Reversal above $1140 is unlikely, but would signal an advance to $1220.
Crude retreated below the rising (green) trendline, signaling trend weakness. Also, the long-term Twiggs Momentum Oscillator (13-week) displays a large bearish divergence, warning of a reversal. Failure of primary support at $72 would confirm.
The primary cause of dollar strength is the euro, which broke through support at $1.42 — signaling the start of a primary down-trend. The Twiggs Momentum low peak (below 1%) strengthens the reversal signal. The initial target for the decline is $1.38*.
* Target calculation: 1.42 - ( 1.46 - 1.42 ) = 1.38
Improve Your Market Timing
Colin Twiggs' weekly review of the global economy will help you identify market risk and improve your timing.
Join our free Trading Diary mailing list with over 140,000 subscribers.
The greenback is weakening against the yen, however, after bearish divergence on Twiggs Momentum Oscillator (5-day). Failure of short-term support at ¥ 91 would signal a (secondary) correction and test of ¥ 88. Recovery above ¥ 93 is less likely, but would indicate another advance.
The Aussie dollar is also weakening against the greenback after respecting resistance at $0.93. It is too early to tell whether this will resolve into a test of primary support at $0.875 or a re-test of resistance at $0.93. Upward breakout now appears unlikely, but would signal an advance to $0.98*.
* Target calculation: 0.93 + ( 0.93 - 0.88 ) = 0.98
If it doesn't matter who wins or loses, then why do they keep score?
~ Vince Lombardi.