Gold Tests $1220
By Colin Twiggs
May 27, 2010 10:00 p.m. ET (12:00 p:m AET)
US Dollar Index
The US Dollar Index is retracing to test short-term support at 85 after breaking out of its trend channel. Failure would signal the end of the rally and a test of the lower trend channel. Upward breakout remains as likely, however, and would offer a short-term target of 90*.
* Target calculation: 87.5 + ( 87.5 - 85 ) = 90
Gold is testing resistance at the December 2009 high of $1220. Respect would warn of a down-swing to primary support at $1060 — confirmed if support at $1170 is broken — while breakout would signal an advance to $1380*.
* Target calculation: 1220 + ( 1220 - 1060 ) = 1380
Crude rebounded off primary support at $70 and is headed for a test of short-term resistance at $79. The correction is not yet over and breakout below the lower border of the large broadening wedge formation would signal a primary down-trend. Twiggs Momentum respecting the zero line from below would strengthen the signal.
The euro is testing short-term support at $1.22 after recently breaking long-term support at $1.25; downward breakout would confirm the long-term target of parity*. Recovery above $1.27 is unlikely, but would warn of a bear trap.
* Target calculation: 1.25 - ( 1.50 - 1.25 ) = 1.00
The pound is retracing to test the new resistance level at $1.48. Respect would confirm the medium-term target of $1.38. Twiggs Momentum (21-day) oscillating below zero strengthens the signal.
* Target calculation: 1.48 + ( 1.58 - 1.48 ) = 1.38
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The dollar is forming a long-term base against the yen, but has yet to show much of an up-trend. Rising Twiggs Momentum confirms the long-term signal. Breakout above ¥95 would signal an advance to ¥100*, while failure of support at ¥88 would warn of further weakness.
* Target calculation: 94 + ( 94 - 88 ) = 100
The Aussie dollar is retracing to test the new resistance level at $0.86. Respect would confirm the primary down-trend, while recovery above $0.89 would signal a bear trap. A Twiggs Momentum rally that respects the zero line (from below) would also confirm the down-trend.
* Target calculation: 0.86 + ( 0.94 - 0.86 ) = 0.78
The machine does not isolate man from the great problems of nature but plunges him more deeply into them.
~ Antoine de Saint-Exupery