Dollar Rally Weakens Gold & Crude

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

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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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~ Vince Lombardi.