Rising Dollar suggests lower gold and commodities

By Colin Twiggs
June 20th, 2012 11:00 p.m. ET (1:00 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 Dollar Index is testing medium-term support at 81.00/81.50. Respect would confirm a healthy primary up-trend. Reversal below the rising trendline is unlikely, but would indicate trend weakness. Another trough above zero on 63-day Twiggs Momentum would strengthen the bull signal.

US Dollar Index

* Target calculation: 81 + ( 81 - 78 ) = 84

Gold displays strong buying support above $1500 with four long tails on the weekly chart. Recovery above $1700/ounce would suggest a new primary up-trend, but the rising dollar warns of weakness. Reversal below $1600 would strengthen the bear signal from 63-day Twiggs Momentum declining below zero.

Spot gold

* Target calculation: 1550 - ( 1800 - 1550 ) = 1300

Brent crude is consolidating after breaking support at $100/barrel. Respect of the new resistance level would warn of another decline, while reversal would test $110.

Brent crude

* Target calculation: 100 - ( 125 - 100 ) = 75

The Nymex WTI Light Crude is similarly consolidating below $85/barrel. Respect of the new resistance level would indicate a decline to $75/76 per barrel.

Nymex WTI Light Crude

The broader CRB Commodities Index found short-term support at 265 as the dollar weakened, but is likely to follow through to long-term support at 250 as the greenback strengthens. 63-Day Twiggs Momentum oscillating below zero warns of a strong down-trend.

CRB Commodities Index

* Target calculation: 290 - ( 330 - 290 ) = 250

There are significant differences between the American and European version of capitalism. The American traditionally emphasizes the need for limited government, light regulations, low taxes and maximum labour-market flexibility. Its success has been shown above all in the ability to create new jobs, in which it is consistently more successful than Europe.

~ Margaret Thatcher