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Gold Breaks Key Support Level

By Colin Twiggs
July 29, 2010 4:00 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.



US Dollar Index

The US Dollar Index continues a strong correction. Expect retracement to test the new resistance level at 85, but respect would signal a primary down-trend. A Twiggs Momentum peak below the zero line would strengthen the signal.

US Dollar Index

Gold

Gold broke medium-term support at $1170, warning of another test of primary support at $1060. Recovery above $1200 is less likely, but would indicate a bear trap. Large bearish divergence on Twiggs Momentum warns of reversal to a primary down-trend. A peak below the zero line would strengthen the signal.

Spot Gold

Crude Oil

Crude is headed for another test of resistance at $80. Breakout would signal an advance to the upper border of the broadening wedge. Reversal below primary support at $70, however would signal a primary down-trend with an initial target of 60*. Twiggs Momentum respect of the zero line from below — signaled by a break of the rising trendline — would be a bear signal.

Crude Oil

* Target calculation: 70 - ( 80 - 70 ) = 60

Euro

The euro is again testing short-term resistance at $1.30. Penetration of the declining trendline is encouraging, indicating that the primary down-trend is weakening, but we will have to see whether retracement respects the new support level at $1.25. Until then, reversal below support at $1.19 remains as likely, and would offer a long-term target of $1.10*. Twiggs Momentum is rising strongly and a trough above the zero line would signal an up-trend.

Euro US Dollar

* Target calculation: 1.20 - ( 1.30 - 1.20 ) = 1.10

UK Pound Sterling

The pound broke through resistance at $1.55 — a weak reversal signal. Bullish divergence on Twiggs Momentum indicates that a primary reversal is likely, but we need a successful test of support at $1.48 to confirm the bull signal. Reversal below the rising trendline is unlikely, but would warn of another test of primary support at $1.43.

Pound Sterling

Japanese Yen

The dollar is headed for a test of primary support at ¥85. Reversal below short-term support at ¥86.50 would confirm. Failure of primary support would offer a target of ¥75*, but expect strong support at the 1995 low of ¥80. Declining Twiggs Momentum confirms the strong down-trend; further peaks below the zero line would strengthen the signal. Recovery above the descending trendline is unlikely, but would indicate that the down-trend is weakening.

US Dollar Yen

* Target calculations: 85 - ( 95 - 85 ) = 75

Australian Dollar

The Aussie dollar is advancing toward resistance at $0.9350. Reversal below the rising trendline is unlikely, but would warn of another test of primary support. Twiggs Momentum needs to continue rising (above 5%) to provide evidence of an up-trend; a shallow peak would be a bear signal.

Australian Dollar US Dollar


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