Aussie breakout while gold stalls
By Colin Twiggs
March 30th, 2011 11:00 p.m. ET (2:00 p:m AEDT)
The Aussie dollar broke through resistance at $1.02, signaling an advance to $1.06*. Retracement is likely to test the new support level.
* Target calculation: 1.02 + ( 1.02 - 0.98 ) = 1.06
Gold hesitated below $1450 as crude oil weakened and the dollar rallied, but now looks ready to resume its advance to $1500*. Another Twiggs Momentum (21-day) trough above zero would strengthen the signal. Breakout above $1450 would confirm, while failure of short-term support at $1410 would weaken the signal.
* Target calculation: 1400 + ( 1400 - 1300 ) = 1500
On GLD, a 13-week Twiggs Money Flow trough above zero would confirm another advance.
Silver is consolidating above support at $36.50 — a bullish sign — and breakout above $38 would indicate a test of the upper trend channel. Breakout below the trend channel would, however, confirm the bearish divergence on Twiggs Momentum, warning of a correction.
* Target calculation: 36.50 + ( 36.50 - 33.50 ) = 39.50
The US Dollar Index retraced to test resistance, but is now weakening. Reversal below 76 would signal a decline to 71* — a bullish sign for gold. Twiggs Momentum holding below zero suggests the down-trend will continue.
* Target calculation: 76 - ( 81 - 76 ) = 71
Nymex WTI crude is consolidating below resistance at $106/barrel. Narrow consolidation would be a bullish sign. Reversal below $97 is unlikely at present, but would warn of a correction back to the long-term trend line. Upward breakout would boost gold in the short/medium-term.
* Target calculation: 105 + ( 105 - 97 ) = 113
The CRB Commodities Index has also weakened slightly. Reversal below 335 is unlikely but would be a bear warning for the Australian Dollar.
The euro is testing resistance between $1.42 and $1.43. Breakout would offer a target of $1.54*. Twiggs Momentum holding above zero suggests the up-trend will continue.
* Target calculation: 1.42 + ( 1.42 - 1.30 ) = 1.54
The pound is consolidating between $1.60 and $1.64. Upward breakout would offer a target of the 2009 high at $1.70*. Declining Momentum, however, warns of weakness and failure of support at $1.60 would test primary support at $1.53.
* Target calculation: 1.63 + ( 1.63 - 1.53 ) = 1.73
The dollar ranging between ¥80 and ¥84 — with a bit of help from the G7. The primary trend remains down. Failure of support is likely to encounter further intervention, but the target remains at ¥76*.
* Target calculation: 80 - ( 84 - 80 ) = 76;
In the spring of 2003 there was worldwide concern that the U.S. economy was falling into a "Japanese-like" malaise; the recovery was stalling, deflation was likely to occur and unemployment was too high. This was the prevailing view despite the fact that the U.S. economy was growing at a 3.2 percent annual rate and the global economy's average growth was nearly 3.6 percent. In addition, the fed funds policy rate was 1¼ percent...... in June 2003 it was lowered further to 1 percent and was left at that rate for nearly a year, as insurance. Following this action, the United States and the world began an extended credit expansion and housing boom...... The long-term consequences of that policy are now well known.
~ Retiring Fed member, Thomas Hoenig