Dollar surges on euro turmoil

By Colin Twiggs
November 10th, 2011 5:00 a.m. ET (8:00 p:m AET)

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The Dollar Index is headed for another test of resistance at 80 on the strength of the euro crisis. Respect of the zero line by 63-day Twiggs Momentum suggests a primary up-trend. Breakout above 80 on the index (or 5% on TMO) would confirm, offering a medium-term target of 85*.

Dollar Index

* Target calculation: 80 + ( 80 - 75 ) = 85

Gold falters on dollar surge

Spot gold is testing short-term support at $1750/ounce as the greenback strengthens. Breach of the rising trendline would suggest that the advance is losing momentum — and breakout below $1700 would signal another test of primary support at $1600. Respect of $1700 is less likely, but would signal an advance to $1900.

Spot Gold

* Target calculation: 1800 + ( 1800 - 1700 ) = 1900

Most forecasters use models that reduce a complex economy to a rigid set of largely backward-looking relationships. Simply put, they try to predict the near future based on what has happened in the recent past. This can work for a while — until the critical moment when a turning point approaches, and such models reliably fail. This is because extrapolating from the recent past is a sure-fire recipe for being surprised by the next turn.