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Dollar rises, gold and silver threaten support

By Colin Twiggs
July 11th, 2012 9:00 p.m. ET (11:00 a: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.



The US Dollar Index rallied to test resistance at 83.50. Breakout would target the 2010 high of 88.00. 63-Day Twiggs Momentum oscillating above the zero line indicates a strong up-trend.

US Dollar Index

* Target calculation: 82 + ( 82 - 78 ) = 86

Spot Gold is consolidating above primary support at $1530 per ounce. 63-Day Twiggs Momentum below zero signals a primary down-trend. Downward breakout would offer a target of $1300*.... unless the Fed introduces QE3.

Spot Gold

* Target calculation: 1550 - ( 1800 - 1550 ) = 1300

Spot Silver is similarly testing primary support at $26 per ounce. Breakout would offer a target of $16* .....again with the QE3 caveat.

Spot Silver

* Target calculation: 26 - ( 36 - 26 ) = 16

Commodities continue in a primary down-trend, warning of a global economic down-turn. Respect of resistance at 295 by the CRB Commodities Index would warn of another primary decline, with a target of 235*. 63-Day Twiggs Momentum oscillating below zero indicates a strong down-trend. Penetration of the descending trendline is unlikely, but would suggest that a bottom is forming.

CRB Commodities Index

* Target calculation: 265 - ( 295 - 265 ) = 235

Brent Crude is also testing resistance — and the descending trendline — at $100 per barrel. Respect would indicate another decline, with a target of $75 per barrel*. There are two wild cards that could impact on price: tensions with Iran and QE3.

ICE Brent Afternoon Markers

* Target calculation: 100 - ( 125 - 100 ) = 75

The gold-oil ratio (measured against Brent crude) is close to its mid-point of 15.0, offering little in the way of overbought/oversold readings for gold over the last few years (after a false overbought reading — above 20 — in 2009).

Gold-Oil Ratio


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