Gold Benefits From Weaker Dollar

By Colin Twiggs
April 15, 2010 1:30 a.m. ET (3:30 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 broke through short-term support at 80.5 and is headed for a test of primary support at 79.5. Bearish divergence on Twiggs Momentum (21-day) warns that the up-trend is losing impetus. Failure of primary support would offer an intial target of the January low at 76.5*.

US Dollar Index

* Target calculation: 79.5 - ( 82.5 - 79.5 ) = 76.5


The weakening dollar suggests stronger gold prices. The metal is testing resistance at $1160, with a short (2 day) retracement indicating buying pressure. Breakout would signal an advance to $1220*. Rising Momentum (21-day) indicates the start of an up-trend. Reversal below $1140 is unlikely, but would test primary support at $1080.

Spot Gold

* Target calculation: 1140 + ( 1140 - 1060 ) = 1220

Crude Oil

Crude successfully tested support at $85/barrel — the upper border of a large broadening wedge formation. Expect an advance to $96/barrel*. A large Momentum trough that respects the zero line would confirm the advance. Reversal below the rising trendline is unlikely, but would suggest a false signal.

Crude Oil

* Target calculation: 84 + ( 82 - 70 ) = 96


The euro gapped above short-term support at $1.36 and the declining trendline, signaling that the down-trend is slowing. The largest component of the dollar index, the euro's movements largely follow an inverse path to the index. Breakout above $1.38 would signal an end to the down-trend and offer a target of $1.43*. Reversal below $1.33 is unlikely, but would warn of a decline to $1.30*.

Euro US Dollar

* Target calculations: 1.38 + ( 1.38 - 1.33 ) = 1.43 and 1.33 - ( 1.36 - 1.33 ) = 1.30

Japanese Yen

The greenback is consolidating between 92.50 and 93.50 against the yen. Rising Twiggs Momentum (21-day) continues to indicate buyer interest — and completion of a large trough above zero would further strengthen the signal. Recovery above ¥93.50 would signal an advance to ¥98.50*. Reversal below the rising trendline is less likely, but would warn of a correction to primary support at ¥88.50.

US Dollar Yen

* Target calculation: 93.50 + ( 93.50 - 88.50 ) = 98.50

Australian Dollar

The Aussie dollar recovered above $0.93 after a short (2 day) retracement, indicating buying pressure. Breakout above $0.93 offers a target of parity*. Rising Twiggs Momentum strengthens the signal. Reversal below $0.92 is unlikely, but would warn of another correction.

Australian Dollar US Dollar

* Target calculation: 0.93 + ( 0.93 - 0.86 ) = 1.00

Life is ten percent what happens to you and ninety percent how you respond to it.

~ Lou Holtz

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