Gold Benefits From Weaker Dollar

By Colin Twiggs
April 15, 2010 1:30 a.m. ET (3:30 p:m AET)

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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*.

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

Gold

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.

* 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.

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

Euro

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*.

* 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.

* 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.

* 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