Yen Bounce As Dollar Weakens

By Colin Twiggs
October 22, 2009 4:00 a.m. ET (7:00 p:m AET)

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The US Dollar Index is testing short-term support at 75. Breakout below 76 offers a long-term target of 71.50*, the 2008 low. Recovery above the declining trendline is unlikely, but would warn that the primary down-trend is bottoming.

* Target calculation: 76 - ( 80 - 76 ) = 72

Dow Jones Industrial Average

The Dow retreated below the new support level at 10000. Follow-through below 9900 would give preliminary warning of a secondary correction. Bearish divergence on Twiggs Money Flow (21-day) warns of selling pressure. Failure of supoort at 9500 would confirm a secondary correction, while recovery above 10100 would signal a new primary advance.

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

Euro

The euro broke through resistance at $1.50; follow-through would signal a long-term advance with a target of $1.60*. Reversal below $1.50 would warn of a test of the lower trend channel.

* Target calculation: 1.50 + ( 1.50 - 1.40 ) = 1.60

Pound Sterling

The pound is strengthening as a result of efforts being made to reduce government debt. Breakout above $1.66 would offer a medium-term target of $1.72*.

* Target calculation: 1.66 - ( 1.66 - 1.60 ) = 1.72

Japanese Yen

The dollar broke through the declining trendline and resistance at ¥90, signaling a rally to test the upper trend channel. In the long term, breakout below ¥87 would offer a target of ¥80*.

* Target calculation: 90 - ( 100 - 90 ) = 80

Australian Dollar

The Aussie dollar continues its rise against the greenback. Expect retracement to test the new support level at $0.90, but failure of support is unlikely. The long-term target is parity*.

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

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