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Dollar finds support

By Colin Twiggs
December 16, 2010 12:30 a.m. ET (4:30 p:m AEDT)

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US Dollar Index

The US Dollar Index respected support at 79, two long tails signaling (short-term) buying pressure. Breakout above 80.50 is likely and would indicate a test of the August high at 83.50. Failure of support at 79, while unlikely, would signal a correction to test primary support at 75.50. Twiggs Momentum (21-day) holding above zero suggests a new up-trend, while reversal below zero would indicate continuation of the primary down-trend.

US Dollar Index

Stock Markets

The S&P 500 is retracing to test support at 1220. Respect would confirm a primary advance to 1425*. Twiggs Money Flow reflects buying pressure, but bearish divergence on the Momentum Oscillator warns of a bull trap. Reversal below 1180 would confirm.

S&P 500 Index

* Target calculation: 1225 + ( 1225 - 1025 ) = 1425

The false break above 250 on DJ Global also indicates weakness — reinforced by bearish divergence on Twiggs Money Flow.

DJ Global Index

Gold

Gold is testing short-term support at $1370. Recovery above 1425 would signal an advance to 1500*, but I am concerned by continued bearish divergence on Twiggs Momentum (21-day). Failure of support would signal a correction to primary support at $1320.

Spot Gold

* Target calculation: 1420 + ( 1420 - 1320 ) = 1520

Silver

Silver is testing medium-term support at 28. Failure would signal a correction to 25. Bearish divergence on Twiggs Momentum (21-day) warns of a correction. Respect of support at 28 is less likely, but would indicate an advance to 32*, spurring demand for gold.

Silver

* Target calculation: 30 + ( 30 - 28 ) = 32

Crude Oil

Brent Crude respected the new support level at $90/barrel, signaling a primary advance with a long-term target of 110*. Twiggs Momentum (21-day) holding above zero indicates a healthy up-trend.

Crude Oil

* Target calculation: 90 + ( 90 - 70 ) = 110

Euro

The euro encountered a band of resistance at $1.34/$1.35, Tuesday's tall shadow indicating selling pressure. Reversal below $1.3150 would suggest a decline to primary support at $1.26. Twiggs Momentum holding below the zero line warns of a primary down-trend.

Euro US Dollar

UK Pound Sterling

The pound penetrated its rising trendline, indicating weakness. Bearish divergence on Twiggs Momentum (21-day) warns of reversal, and the peak below zero strengthens the signal. Failure of primary support at $1.53 would confirm. Recovery above $1.60 is most unlikely, but would suggest an advance to $1.66*.

Pound Sterling

* Target calculation: 1.60 + ( 1.60 - 1.54 ) = 1.66

Japanese Yen

The dollar again respected support at ¥83, long tails indicating buying pressure. Breakout above ¥84.50 would confirm a rally to ¥86. Reversal below ¥83 is unlikely, but would warn of another test of ¥80. Momentum holding above zero, suggests the start of an up-trend, but the primary trend remains down for the present.

US Dollar Yen

Australian Dollar

The Aussie dollar made another attempt at parity, but encountered strong selling pressure. Reversal below $0.9750 would indicate weakness. Bearish divergence on Twiggs Momentum is already bearish, and reversal below zero would strengthen the signal. Failure of primary support at $0.9550, however, would signal a trend reversal.

Australian Dollar US Dollar

* Target calculation: 0.97 - ( 1.02 - 0.97 ) = 0.92



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