Crude Dives, Sterling Strengthens
By Colin Twiggs
June 24, 2010 4:00 a.m. ET (6:00 p:m AET)
US Dollar Index
The US Dollar Index is testing support at 85. Failure would test primary support at 80, while recovery above 87.5 would indicate an advance to 92*. Twiggs Momentum respect of the zero line would also signal an advance.
* Target calculation: 88.5 + ( 88.5 - 85 ) = 92
The weakening dollar strengthens gold — currently testing resistance at $1250. Narrow consolidation below resistance favors a breakout, which would signal an advance to $1330*. Reversal below $1220 is less likely, but would warn of another test of $1170. Twiggs Momentum remains uncertain: recovery above 8% would favor a strong advance, while reversal below 4% would indicate weakness.
* Target calculation: 1250 + ( 1250 - 1170 ) = 1330
Crude encountered strong resistance at $80 and is retracing for another test of primary support at $70. Breakout would signal a primary down-swing with a target of 60*. Twiggs Momentum respect of the zero line (from below) would confirm the down-trend.
* Target calculation: 70 - ( 80 - 70 ) = 60
The euro is testing the band of resistance between $1.25 and $1.26. Respect would confirm the long-term target of parity*. Breakout above the descending trendline is unlikely but would indicate that the down-trend is weakening. Twiggs Momentum holding well below zero continues to signal a strong primary down-trend.
* Target calculation: 1.25 - ( 1.50 - 1.25 ) = 1.00
Bullish divergence on Twiggs Momentum (21-day) indicates a reversal. Penetration of the descending trendline strengthens the signal. Expect a retracement to re-test support at $1.43; respect would add further weight to the signal.
The dollar is undergoing a correction against the yen. Expect support at ¥88; failure would test primary support at ¥85. In the long term, failure of primary support at ¥85 would offer a target of ¥75, while breakout above ¥95 would test long-term resistance at ¥100.
* Target calculations: 85 - ( 95 - 85 ) = 75 and 95 + ( 95 - 90 ) = 100
After completing a narrow double bottom, the Aussie dollar climbed steeply to $0.88. Expect retracement to test support at $0.86/$0.85. Failure of support at $0.85 would confirm the bear trend — as would Twiggs Momentum respect of the zero line (from below). Respect of support, on the other hand, would signal an advance to $0.94.
* Target calculation: 0.81 - ( 0.88 - 0.81 ) = 0.74
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