Dollar Spurs Gold Advance

By Colin Twiggs
January 14, 2010 9:30 p.m. ET (1:30 p: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 retraced to test support at 76.6. Respect of the support level would confirm the primary up-trend — look for confirmation from a rise above 77.3 and/or Twiggs Momentum Oscillator (5-day) recovery above the declining trendline. In the medium term, breakout above 78.4 would signal an advance to 80*, while failure of support at 76.6 would warn of trend weakness.

* Target calculation: 78.4 + ( 78.4 - 76.6 ) = 80.2

Gold

Gold rallied in response to the weakening dollar — following a bullish divergence on Twiggs Momentum Oscillator (5-day). Today's recovery above resistance at 1140 after a brief retracement is a positive sign and breakout above $1160 would confirm an advance to $1200*. Reversal below the rising trendline, however, would test support at $1080.

* Target calculation: 1140 + ( 1140 - 1080 ) = 1200

Euro

The euro is consolidating below resistance at $1.46. Breakout would signal an advance to $1.50*, but respect of resistance, signaled by Momentum reversing below zero, would warn of another test of primary support at $1.42.

* Target calculation: 1.46 + ( 1.46 - 1.42 ) = 1.50

Japanese Yen

The greenback warns of a correction against the yen, having reversed below the rising trendline following bearish divergence on Twiggs Momentum Oscillator (5-day). Failure of support at ¥ 91 would confirm; signaling a test of ¥ 88. Recovery above ¥ 93, however, would indicate another primary advance.

Australian Dollar

The Aussie dollar recovered from its recent correction and is testing resistance at $0.93. Brief retracement [v] at the resistance line is a bullish sign and breakout above $0.93 would offer a target of $0.98*. Reversal below $0.92, however, would indicate further consolidation.

* Target calculation: 0.93 + ( 0.93 - 0.88 ) = 0.98

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