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Dollar Rally Weakens Gold & Crude

By Colin Twiggs
January 21, 2010 2:00 a.m. ET (6:00 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 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.

US Dollar Index

* Target calculation: 78.4 + ( 78.4 - 76.6 ) = 80.2

Gold

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.

Spot Gold

Crude Oil

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.

Crude Oil

Euro

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*.

Euro US Dollar

* Target calculation: 1.42 - ( 1.46 - 1.42 ) = 1.38

Japanese Yen

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.

US Dollar Yen

Australian Dollar

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*.

Australian Dollar US Dollar

* Target calculation: 0.93 + ( 0.93 - 0.88 ) = 0.98

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