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Euro Tremors Weaken Gold

By Colin Twiggs
March 25, 2010 3:00 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 completed a flag continuation pattern and is advancing towards the target of 84.5*. Twiggs Momentum (21-day) breakout above the declining trendline reinforces the signal. Retracement that respects the new support level at 81.5 would confirm.

US Dollar Index

* Target calculation: 81.5 + ( 81.5 - 78.5 ) = 84.5

Gold

Gold responded by breaking short-term support at $1100, signaling a test of the band of primary support between $1050 and $1060. A short-term peak on Twiggs Momentum (21-day) that respects the zero line (from below) would strengthen the bear signal. Recovery above the descending trendline is less likely, but would indicate continuation of the advance to $1160.

Spot Gold

Crude Oil

Crude is retracing to test support at $78/barrel. Respect is likely and would signal a test of the upper border of the large broadening wedge consolidation. Momentum breaking above the declining trendline favors continuation of the primary up-trend; and a large trough that respects the zero line would confirm. Failure of support at $78, however, would indicate a failed up-swing and downward breakout from the wedge formation.

Crude Oil

Euro

The euro plunged through support at $1.34 after the Fitch downgrade of Portugal's sovereign debt rating. The European Monetary Union faces significant instability in the months ahead. Assisting Greece (2.6% of EMU GDP) or Portugal (1.8%) may buy some time, but does not solve the debt issues facing the far larger economies of Italy (17% of EMU GDP) and Spain (11.7%). The current decline of the euro will test $1.30*, but the longer term target is the 2009 low of $1.25*.

Euro US Dollar

* Target calculations: 1.34 - ( 1.38 - 1.34 ) = 1.30 and 1.34 - ( 1.42 - 1.34 ) = 1.26

Japanese Yen

The greenback is testing resistance at ¥ 92; breakout would signal the end of the correction — and an advance to ¥ 100*. Recovery above $93.50 would confirm. Reversal below ¥ 88.5, however, would test primary support at ¥ 85.

US Dollar Yen

* Target calculation: 94 + ( 94 - 88 ) = 100

Australian Dollar

The Aussie dollar is testing short-term support and the rising trendline at $0.91 — caused by a general flight to (relative) safety of the greenback. Failure of support would warn of a correction to test primary support at $0.86. Twiggs Momentum Oscillator (21-day) reversal below zero would strengthen the bear signal, but a large trough above the zero line would indicate another primary advance.

Australian Dollar US Dollar


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