Gold steadies as the euro weakens
By Colin Twiggs
June 23rd, 2011 5:00 a.m. ET (7:00 p:m AET)
Concern over the sovereign debt crisis in Europe strengthened demand for gold, with the spot price testing medium-term resistance at $1550 per ounce. Momentum remains positive and breakout would signal an advance to $1675*. But retreat below $1510 would echo the miner's warning, testing support at $1460. A stronger dollar would suggest weaker gold prices.
* Target calculation: 1575 + ( 1575 - 1475 ) = 1675
The Gold Miners ETF (GDX), which tracks the AMEX Gold Miners Index ($GDM), retreated above the band of primary support at 54.00, indicating a false break. Twiggs Money Flow (21-day) signals medium-term accumulation.
The AMEX Gold Bugs Index ($HUI), representing unhedged gold stocks, similarly retreated above support at 500. Momentum below zero, however, continues to warn of a down-trend.
Silver remains range-bound between support at $33 and resistance at $39 per ounce. Momentum below zero warns of a down-trend. Recovery above $39 is less likely but would signal another test of $50.
The Dollar Index is consolidating in a triangle formation below resistance at $76. Continuation of the down-trend is more likely, but bullish divergence on Twiggs Momentum suggests that the down-trend is weakening. Breakout above 76.50 would signal a primary up-trend.
* Target calculation: 73 - ( 76 - 73 ) = 70
The CRB Commodities Index is testing medium-term support at 335, mimicked by the Australian dollar. Failure would signal a primary down-trend (for CRB). Recovery above 350 is unlikely, but would signal another advance. Again, the dollar is likely to have a strong influence.
Divergence between Brent crude and West Texas Intermediate crude has reached record levels as oil inventories in Cushing, Oklahoma soar. The build-up is expected to last for several months and undermines the credibility of Nymex's premier WTI contract [FT.com]. Brent crude breakout below $108/barrel would confirm a primary down-trend.
The euro is headed for another test of support at $1.40. Failure of support would signal a primary down-trend, with an initial target of $1.30*.
* Target calculation: 1.40 + ( 1.40 - 1.30 ) = 1.50 or 1.40 - ( 1.50 - 1.40 ) = 1.30
The Swiss franc continues to soar, in a strong primary up-trend against both the dollar and the euro. Respect of medium-term support at $1.16 would confirm trend strength, as indicated by repeated troughs [+] above the zero line.
* Target calculation: 1.00 + ( 1.00 - 0.80 ) = 1.20
The pound is testing medium-term support at $1.60; failure would test primary support at $1.53. The sharp fall on Twiggs Momentum warns of trend weakness.
* Target calculation: 1.63 + ( 1.63 - 1.53 ) = 1.73
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The dollar is consolidating in a narrow range above long-term support at ¥80 — a bearish sign. Twiggs Momentum oscillating below zero indicates continuation of the down-trend. Failure of support would signal a decline to ¥75*, but would most likely spur further BOJ efforts to halt appreciation of the yen.
* Target calculation: 80 - ( 85 - 80 ) = 75
The kiwi dollar retreated above medium-term support at $0.81 against the greenback. Breakout above $0.82 would indicate continuation of the advance, while reversal below $0.81 would signal a correction to test the long-term trendline. Bearish divergence on Twiggs Momentum favors a correction.
* Target calculation: 81 + ( 81 - 78 ) = 84
Weaker commodity prices are weighing on the Aussie dollar. Breakout below support at $1.05 against the greenback would test $1.02. Recovery above $1.075 is unlikely, but would suggest a fresh advance.
* Target calculation: 1.10 + ( 1.10 - 1.05 ) = 1.15
We Greeks believe that a man who takes no part in public affairs is not merely lazy, but good for nothing.
~ Thucydides (c. 460 BC – c. 400 BC).