Gold Breakout As Dollar Weakens

By Colin Twiggs
October 8, 2009 0:05 a.m. ET (3:05 p:m AET)

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The US Dollar Index is testing short-term support at 76; failure would signal a down-swing to test 74*. Recovery above 77.50 is most unlikely, but would indicate that the primary down-trend is weakening.

US Dollar Index

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


Spot gold spiked upwards to test short-term resistance at $1050; breakout would offer a target of 1100*. The long-term target for the current advance is $1300*; failure of support at $985 is most unlikely, but would warn of a potential bull trap.

Spot Gold

* Target calculations: 1000 + ( 1000 - 900 ) = 1100 and 1000 + ( 1000 - 700 ) = 1300


The euro is headed for another test of resistance at $1.48; breakout would signal an advance to $1.50*. Reversal below $1.45 is unlikely, but would warn of a weakening up-trend. In the long term, breakout above $1.50 would signal an advance to the 2008 high of $1.60.

Euro US Dollar

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

Japanese Yen

The dollar broke out below its trend channel against the yen. Expect a test of the 2008 low of ¥87. Breakout above the declining trendline would warn of reversal to test the upper channel border — and resistance at ¥94.

US Dollar Yen

Australian Dollar

The Aussie dollar broke out of its widening formation against the greenback, penetrating the key resistance level of $0.90. Expect a retracement to test the new support level, but the long term target is parity*.

Australian Dollar US Dollar

* Target calculation: 0.90 + ( 0.90 - 0.80 ) = 1.00

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