Euro Weakens While Pound Strengthens

By Colin Twiggs
April 22, 2010 3:00 a.m. ET (5:00 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 found support at 80 and is headed for another test of resistance at 82. Bearish divergence on Twiggs Momentum (21-day) continues to warn that the up-trend is losing impetus. Failure of primary support at 79.5 would offer an initial target of the January low at 76.5*. Breakout above 82.2 is unlikely, but would test 84*.

* Target calculations: 79.5 - ( 82.5 - 79.5 ) = 76.5 and 82 + ( 82 - 80 ) = 84

Gold

The weakening dollar suggests stronger gold prices. The precious metal found support at $1120 and is rallying for another test of resistance at $1160. Breakout would signal an advance to $1220*. Rising Momentum (21-day) indicates the start of an up-trend. Reversal below $1120 is unlikely, but would test support at $1080.

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

Crude Oil

Crude is consolidating in a narrow range between $84 and $87/barrel — a continuation pattern. Upward breakout would offer a long-term target of $96/barrel*. Reversal below the rising trendline is unlikely, but would warn of another test of primary support at $70. Momentum breakout below the rising trendline would be bearish in the short-term, but a subsequent large trough that respects the zero line would signal a primary advance.

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

Euro

The euro is again weakening, on concerns over Greece, and is headed for a test of support at $1.33. Downward breakout would warn of a decline to $1.29*. Recovery above $1.38 is now unlikely, but would signal an end to the down-trend — offering a target of $1.43*.

* Target calculations: 1.38 + ( 1.38 - 1.33 ) = 1.43 and 1.33 - ( 1.37 - 1.33 ) = 1.29

Pound Sterling

The pound broke through the band of resistance between $1.53 and $1.54, signaling a rally to $1.64. Rising Twiggs Momentum (21-day) confirms buying pressure. The medium-term target is $1.60*.

* Target calculation: 1.54 + ( 1.54 - 1.48 ) = 1.60

Japanese Yen

In the long term, bullish divergence on Twiggs Momentum (63-day) signals dollar buying pressure. But unless the next rally manages to break through resistance at ¥100, the greenback is likely to test support at its previous low of ¥80.

In the shorter term, the dollar is again testing resistance at ¥93.50. Upward breakout is more likely, and would signal an advance to ¥98.50*. Reversal below ¥91.50, however, would warn of correction to primary support at ¥88.

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

Australian Dollar

The Aussie battler retraced to test support at $91.50; downward breakout would warn of a correction. Falling Twiggs Momentum strengthens the warning — more so if the indicator breaks zero. Recovery above $0.94 is less likely, but would offer a long-term target of parity* (expect strong resistance at that level).

* Target calculation: 0.94 + ( 0.94 - 0.86 ) = 1.02

In life lots of people know what to do, but few people actually do what they know. Knowing is not enough! You must take action.

~ Tony Robbins