Gold & Crude Test Support

By Colin Twiggs
January 22, 2008 1:30 a.m. ET (5:30 p.m. AET)

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While equities tumble, gold and the euro are both retracing against the greenback. Expect a reversal if the Fed announces further rate cuts at the January 30/31 FOMC meeting.

Spot gold retraced from its target of $900. Expect medium-term support at $850/$840. Respect (of support) would signal continuation of the up-trend. Primary support at $775 is unlikely to be tested.

spot gold

Source: Netdania

Crude Oil

Crude is likely to lag gold and the euro as it is more susceptible to falling demand from a slowing US economy.

March 2008 Light Crude is testing support at $90/barrel. Respect of support would signal another test of resistance at $100. Failure of primary support at $87 would warn that crude has commenced a primary down-trend.

crude oil


The euro is headed for a test of primary support at $1.43. Respect of support (possibly with one/more false breaks) is expected and would indicate another test of resistance at $1.50. Downward breakout is not expected — and would signal a primary down-trend.

euro us dollar short-term

Source: Netdania

The dollar broke through support at 107 against the yen, signaling a test of key long-term support at 100.

us dollar yen

Source: Netdania

Rising uncertainty in financial markets is likely to result in the unwinding of carry trades and the Australian dollar is testing long-term support at 90/86 against the yen (the intra-day low was 86). Failure of support would suggest long-term weakness and a target of 73 yen: 90 - (107 - 90) = 73.

The Aussie is also testing support at $0.8550 against the greenback. Failure would signal a primary down-trend, but the hawkish stance of the RBA should help support the Aussie.

australian dollar compared to us dollar

Source: Netdania

Regarding equities, the ASX has joined the general bear market, breaking below primary support at 5650 to signal the start of a down-trend. Expect support at 4800.

asx all ordinaries

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~ Bernard Baruch:
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