Dollar Sinks But Gold Hesitates

By Colin Twiggs
September 9, 2009 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 broke through short-term support at 77.50 to continue its primary down-trend. The target for the current down-swing is 74*. Reversal above 79.50 is unlikely, but would warn of a trend reversal.

* Target calculation: 78.50 - ( 83 - 78.50) = 74

Gold

Spot gold retreated after briefly penetrating resistance at the key $1000 level. Narrow consolidation would be a bullish sign, signaling continued buying support, while sharp retracement, below say $970, would warn that profit-taking has overwhelmed buyers. Penetration of the rising trendline would indicate another secondary correction. In the long term, the weakening dollar suggests that upward breakout is more likely. Breakout above $1000 would offer a target of $1300*; failure of support at $900, however, would signal a test of the November 2008 low of $700.

* Target calculation: 1000 + ( 1000 - 700 ) = 1300

Euro

The euro broke through resistance at $1.44, signaling a primary advance to $1.50*. Reversal below $1.44 is unlikely, but would warn of trend weakness, while penetration of the rising trendline would signal a secondary correction.

* Target calculation: 1.44 + ( 1.44 - 1.38 ) = 1.50

Japanese Yen

The dollar continues its primary down-trend against the yen; penetration of support at ¥92.50 indicating a test of the lower channel. Reversal above ¥94 is unlikely, but would warn of trend weakness. Upward breakout from the trend channel is again unlikely, but would suggest a primary trend reversal.

Australian Dollar

The Aussie dollar continues its ascent against the greenback despite weaker commodity prices. Expect a test of the upper trend channel around $0.90*, with short-term resistance levels at $0.86 and $0.88. Reversal below the lower trend channel is most unlikely, but would warn that the primary up-trend is weakening.

* Target calculation: 0.80 + ( 0.80 - 0.70 ) = 0.90

Help to keep this newsletter free! Forward this link to friends and colleagues 

An imbalance between rich and poor is the oldest and most fatal ailment of all Republics.

~ Plutarch (circa 45 - 125 A.D.)