Aussie Breakout

By Colin Twiggs
July 15, 2010 6:00 a.m. ET (8:00 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.

Australian Dollar

The Aussie dollar broke resistance at $0.875, confirming that the down-trend has ended and signaling an advance to $0.94. Twiggs Momentum crossed to above zero but needs to continue rising (above 5%) to provide evidence of an up-trend. Reversal below support at $0.84 is unlikely, but would warn of a false signal.

US Dollar Index

The US Dollar Index is undergoing a strong correction, breakout below the trend channel and Twiggs Momentum below zero warn that the primary up-trend is weakening. Reversal below 80 or a Momentum peak below zero would signal reversal to a down-trend, while recovery above 85 would suggest another test of 89.

Gold

Gold found support at $1200; reversal above resistance at $1220 would indicate an advance to $1380*. Breakout above $1260 would confirm, while retreat below the rising trendline would warn of another test of primary support at $1060. Twiggs Momentum respect of the zero line (from above) would indicate continuation of the primary up-trend.

* Target calculation: 1220 + ( 1220 - 1060 ) = 1380

Crude Oil

Crude is rallying toward another test of resistance at $80. Breakout would signal an advance to the upper border of the broadening wedge. Reversal below primary support at $70, however would signal a primary down-trend with an initial target of 60*. Twiggs Momentum respect of the zero line (from below) would confirm the bear signal.

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

Euro

The euro penetrated resistance at $1.25 and the descending trendline. It is too early to call this a reversal, but the primary down-trend is weakening. Expect retracement to test the new support level at $1.25. Failure of the rising trendline would warn of a primary down-swing with a target of parity* — confirmed if support at $1.19 is broken. Respect of support would suggest a reversal, but confirmation would only come from a higher trough followed by a new high. Twiggs Momentum crossed to above zero but must rise further (say 5%) if it is to provide evidence of an up-trend.

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

UK Pound Sterling

The cable penetrated its declining trendline while Twiggs Momentum recovered above zero to indicate that the primary down-trend is losing momentum. Retracement that respects the new support level of $1.48, or a Twiggs Momentum trough that respects the zero line from above, would indicate a reversal, but confirmation would only come from a higher trough followed by a new high. Retreat below $1.48 is less likely, but would warn of another test of support at $1.42.

Japanese Yen

The dollar breached support at ¥88, signaling a test of primary support at ¥85. Declining Twiggs Momentum confirms the down-trend; another peak that respects the zero line from below would strengthen the signal. Recovery above the descending trendline is unlikely, but would indicate that the momentum is slowing. In the long term, failure of primary support at ¥85 would offer a target of ¥75*, while recovery above ¥95 would test long-term resistance at ¥100.

* Target calculations: 85 - ( 95 - 85 ) = 75

Facts are God's arguments; we should be careful never to misunderstand or pervert them.

~ Tryon Edwards