Crude Dives, Sterling Strengthens

By Colin Twiggs
June 24, 2010 4:00 a.m. ET (6:00 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.

US Dollar Index

The US Dollar Index is testing support at 85. Failure would test primary support at 80, while recovery above 87.5 would indicate an advance to 92*. Twiggs Momentum respect of the zero line would also signal an advance.

* Target calculation: 88.5 + ( 88.5 - 85 ) = 92

Gold

The weakening dollar strengthens gold — currently testing resistance at $1250. Narrow consolidation below resistance favors a breakout, which would signal an advance to $1330*. Reversal below $1220 is less likely, but would warn of another test of $1170. Twiggs Momentum remains uncertain: recovery above 8% would favor a strong advance, while reversal below 4% would indicate weakness.

* Target calculation: 1250 + ( 1250 - 1170 ) = 1330

Crude Oil

Crude encountered strong resistance at $80 and is retracing for another test of primary support at $70. Breakout would signal a primary down-swing with a target of 60*. Twiggs Momentum respect of the zero line (from below) would confirm the down-trend.

* Target calculation: 70 - ( 80 - 70 ) = 60

Euro

The euro is testing the band of resistance between $1.25 and $1.26. Respect would confirm the long-term target of parity*. Breakout above the descending trendline is unlikely but would indicate that the down-trend is weakening. Twiggs Momentum holding well below zero continues to signal a strong primary down-trend.

* Target calculation: 1.25 - ( 1.50 - 1.25 ) = 1.00

UK Pound Sterling

Bullish divergence on Twiggs Momentum (21-day) indicates a reversal. Penetration of the descending trendline strengthens the signal. Expect a retracement to re-test support at $1.43; respect would add further weight to the signal.

Japanese Yen

The dollar is undergoing a correction against the yen. Expect support at ¥88; failure would test primary support at ¥85. In the long term, failure of primary support at ¥85 would offer a target of ¥75, while breakout above ¥95 would test long-term resistance at ¥100.

* Target calculations: 85 - ( 95 - 85 ) = 75 and 95 + ( 95 - 90 ) = 100

Australian Dollar

After completing a narrow double bottom, the Aussie dollar climbed steeply to $0.88. Expect retracement to test support at $0.86/$0.85. Failure of support at $0.85 would confirm the bear trend — as would Twiggs Momentum respect of the zero line (from below). Respect of support, on the other hand, would signal an advance to $0.94.

* Target calculation: 0.81 - ( 0.88 - 0.81 ) = 0.74

An education isn't how much you have committed to memory, or even how much you know. It's being able to differentiate between what you know and what you don't.

~ Anatole France