Yen jumps on BOJ intervention
By Colin Twiggs
September 16, 2010 5:00 a.m. EDT (7:00 p:m AET)
The dollar jumped sharply against the yen, breaking short-term resistance at ¥85 on the back of large-scale intervention by the Japanese government. Continued (yen) sales by the Bank Of Japan are likely to maintain support at ¥83 in the short/medium-term. Ability to hold this level in the long-term is doubtful, however, given the magnitude of the task and the results of the last (2004) intervention (WSJ). Breach of support at the 1995 low of ¥80 would be an admission of failure and would confirm a further primary decline. 21-day Twiggs Momentum holding below the zero line indicates a strong primary down-trend.
The US Dollar Index is headed for a test of primary support at 80; failure would signal a decline to 77*. Reversal above 83.5 is unlikely, but indicate an advance to 89. Respect of zero by 63-day Twiggs Momentum favors continuation of the primary down-trend.
* Target calculation: 80 - ( 83 - 80 ) = 77
The weakening dollar helped to strengthen gold, crude oil and several of the currency crosses.
Gold broke through resistance at $1260 and is now retracing to test the new support level. Respect of $1260 would signal a primary advance to $1360*. Reversal below $1240 is less likely, but would warn of a correction to primary support at $1160. Twiggs Momentum (21-day) retracement that respects the zero line (from above) would confirm the primary up-trend.
* Target calculation: 1260 + ( 1260 - 1160 ) = 1360
Crude broke resistance at $78/barrel and is now retracing to test the new support level. Respect would signal a rally to $83. The longer-term picture remains dull, however, with Twiggs Momentum (63-day) oscillating in a narrow band around zero. Expect a ranging market, between $70 and $83, to continue for some time.
The euro responded to the weaker dollar with a rally to test resistance at $1.33. Breakout would signal the start of a primary up-trend, while reversal below $1.25 would re-test primary support at $1.19. Twiggs Momentum (63-day) recovery above zero would suggest the start of an up-trend, but reversal below its August low would warn of another primary decline.
The pound respected support at $1.54, indicating an advance to $1.66*; breakout above $1.60 would confirm. Twiggs Momentum (63-day) holding above the zero line strengthens the bull signal.
* Target calculation: 1.60 + ( 1.60 - 1.54 ) = 1.66
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The Aussie dollar found resistance at $0.94 and is retracing to test short-term support at $0.92. Bearish divergence on 21-day Twiggs Momentum warns of a secondary correction. Reversal below the rising trendline would warn of another test of primary support at $0.81. Breakout above $0.94 would offer a target of parity — if confirmed.
* Target calculation: 0.93 + ( 0.93 - 0.81 ) = 1.05
There is nothing more difficult to carry out, nor more doubtful of success, nor more dangerous to handle, than to institute a new order of things.
~ Niccolo Machiavelli