The Dollar Index rallied to test medium-term resistance at 81. Breakout above 81.50 would test the 2012 high at 84*. Recovery of 63-day Twiggs Momentum above zero suggests a primary up-trend.
* Target calculation: 81.5 + ( 81.5 – 79 ) = 84
Dollar Index weakens
The Dollar Index is testing primary support at 78.50. Breach would signal a down-swing with a target around 75*. Twiggs Momentum oscillating below zero suggests further weakness. Recovery above 81, however, would indicate that the down-trend is over.
* Target calculation: 78.5 – ( 81.5 – 78.5 ) = 75.5
Gold weakens while crude rises
Gold is undergoing a correction on the weekly chart. Breach of support at 1625 would indicate another test of primary support at $1525. Retreat of 63-day Twiggs Momentum below zero warns of a primary down-trend. Recovery above $1700 per ounce, however, would indicate that the correction is over.
Crude oil, however, is rising, with Brent Crude breaking resistance at $117/barrel to signal a primary up-trend. Twiggs Momentum rising above zero already suggests an up-trend. Recovery of Nymex WTI above $99/barrel would confirm.
* Target calculation: 116 + ( 116 – 106 ) = 126
Normally gold and crude move together. A divergence would be highlighted by the gold-oil ratio (below). A decline to 10 is normally taken as buying signal, but in recent years fluctuations have been a lot narrower — between 12 and 18.
Gold and the dollar
Gold is undergoing a correction on the weekly chart. Declining momentum and breach of the long-term rising trendline suggest that the 5-year bull-trend is ending, but recovery above $1700 per ounce would indicate one more attempt at $1800 resistance. Respect of $1700, however, would indicate a test of primary support at the May 2012 low at $1525.
The Dollar Index respected resistance at 81 and is likely to re-test primary support at 78.50. Twiggs Momentum oscillating below zero already indicates a primary down-trend — confirmed if primary support is broken. Recovery above 81.50 remains unlikely, but would indicate an advance to 84.
* Target calculation: 78.5 – ( 81.5 – 78.5 ) = 75.5
Gold breaks $1700
Gold broke support at $1700 per ounce, indicating a test of primary support at $1675. Breakout would offer an initial target of $1600*, with a long-term target of the May 2012 low at $1525. Declining 63-day Twiggs Momentum indicates weakness but values above zero still reflect a primary up-trend and the weakening dollar suggests strong support.
* Target calculation: 1675 – ( 1750 – 1675 ) = 1600
The Dollar Index broke medium-term support at 80 on the weekly chart while the dollar is approaching its September low against the euro. The 63-day Twiggs Momentum peak below zero indicates a primary down-trend — confirmed if primary support at 78.50 is broken. Recovery above 81.50 is most unlikely but would indicate an advance to 84.
* Target calculation: 78.5 – ( 81.5 – 78.5 ) = 75.5
The daily chart shows retracement to confirm resistance at 80.
Gold long tail as dollar retreats
Yesterday’s long tail on the spot gold daily chart indicates support at $1700 per ounce. Recovery above $1750 would signal another test of $1800. 63-Day Twiggs Momentum well above zero continues to indicate a healthy up-trend. A weakening dollar would strengthen the signal.
* Target calculation: 1800 + ( 1800 – 1700 ) = 1900
The Dollar Index (weekly chart) is testing medium-term support at 80. Failure would threaten a head-and-shoulders reversal. Breach of primary support at 78.50 would offer a target of 74*. 63-Day Twiggs Momentum holding below zero already suggests a primary down-trend. Recovery above 81.50 is unlikely but would indicate an advance to 84.
* Target calculation: 79 – ( 84 – 79 ) = 74
The DJ-UBS Commodity Index (weekly chart) respected support at 140, helped by the weaker dollar. 63-Day Twiggs Momentum above zero suggests a primary up-trend but reversal would re-test primary support at 126.
Nymex WTI Light Crude and ICE Brent Crude both trend downwards but the gap between the two is widening. Middle East tensions affect Brent Crude supply more than its West Texas cousin. 63-Day Twiggs Momentum holding below zero warns of a primary down-trend. Breach of primary support would confirm: WTI at $78 per barrel and Brent Crude at $90.
Gold strengthens as dollar retreats
Long tails on the last two days of the spot gold daily chart indicate strong support at $1700 per ounce. Breakout above $1740 would indicate another test of $1800. 63-Day Twiggs Momentum well above zero suggests a healthy up-trend. A weakening dollar would strengthen the signal.
* Target calculation: 1800 + ( 1800 – 1700 ) = 1900
The Dollar Index (weekly chart) retreated below resistance at 81. Follow-through below 80 would test primary support at 78.50, while failure of primary support would complete a head-and-shoulders reversal with a target of 74*. 63-Day Twiggs Momentum holding below zero already suggests a primary down-trend. Breakout above 81.50 is unlikely but would indicate an advance to 84.
* Target calculation: 79 – ( 84 – 79 ) = 74
The DJ-UBS Commodity Index (weekly chart) respected support at 140. The 63-day Twiggs Momentum trough above zero suggests a primary up-trend. A weakening dollar would strengthen the signal, while breakout above 152 would confirm. Breach of 140 is unlikely but would test primary support at 126.
Nymex WTI Light Crude and ICE Brent Crude are both trending downward. The 63-day Twiggs Momentum peak at zero warns of a primary down-trend. Breach of primary support would confirm: WTI at $78 per barrel and Brent Crude at $90.
The Gold-Euro-Dollar conundrum Part II
Last week we discussed conflicting signals from the euro and US dollar. The Dollar Index and the euro are normally plotted inversely to each other. I have reversed this on the chart below. As expected, with the euro the largest component (57.6 percent) of the dollar index weighted basket of currencies, there is a strong correlation. Divergences between the two seldom last as traders “arbitrage” the differences.
The rising Dollar Index is testing resistance at 81.50. Respect of resistance would threaten a head-and-shoulders reversal — with a target of 74* — following a breakout below primary support at 78.50. Falling 63-day Twiggs Momentum, below zero, already suggests a primary down-trend. But recovery above 81.50/82.00 would negate this, indicating another primary advance.
* Target calculation: 79 – ( 84 – 79 ) = 74
Spot gold (daily chart) is testing short-term support at $1700 per ounce. Respect of support would reinforce the earlier trendline break, suggesting another test of $1800. But a stronger dollar and failure of support at $1675 would indicate a more severe correction.
* Target calculation: 1800 + ( 1800 – 1700 ) = 1900
The DJ-UBS Commodity Index (weekly chart) continues to test support at 140. A 63-day Twiggs Momentum trough above zero would indicate a primary up-trend. Recovery above 152 would confirm. A stronger dollar and breach of 140, however, would test primary support at 126.
Nymex WTI Light Crude and ICE Brent Crude are both headed for a test of primary support: WTI at $76/$78 per barrel and Brent Crude at $90. The 63-day Twiggs Momentum peak below zero warns of a primary down-trend.
The Gold-Euro-Dollar conundrum
The Euro broke support at $1.28 against the greenback (weekly chart). Respect of the descending trendline warns of a down-swing to test primary support at $1.20. Reversal of 63-day Twiggs Momentum below zero would strengthen the signal. But the Dollar Index and Gold suggest the opposite. Recovery above $1.28 would indicate a bear trap.
The Dollar Index is inversely rising to test resistance at 81/81.50. Breakout would indicate another test of 84.00 but 63-Day Twiggs Momentum below zero warns of a primary down-trend. Rising gold also suggests dollar weakness. Reversal below support at 78.50 would complete a head-and-shoulders reversal with a target of 74*.
* Target calculation: 79 – ( 84 – 79 ) = 74
Spot gold (daily chart) broke resistance at $1725 per ounce, signaling an advance to $1900*. The 63-day Twiggs Momentum trough above zero indicates a primary up-trend. Breakout above $1800 would confirm. The conundrum is the euro is weakening and dollar index strengthening but gold is rising rather than weakening as expected.
* Target calculation: 1800 + ( 1800 – 1700 ) = 1900
The DJ-UBS Commodity Index (weekly chart) found support at 140. 63-Day Twiggs Momentum is testing zero. Respect would indicate a primary up-trend. Recovery above $1.52 would confirm. Breach of $140, however, and 63-day Twiggs Momentum below zero, resulting from a strengthening dollar and/or global down-turn, would test primary support at 126.
Nymex WTI Light Crude is headed for a test of primary support at $76/$78 per barrel. Declining 63-day Twiggs Momentum, below zero, warns of a primary down-trend. Brent Crude is also weakening, headed for test of primary support at $90.
Dollar Index
The Dollar Index is testing resistance at 81/81.50. Breakout would indicate another test of 84.00. But 63-day Twiggs Momentum below zero warns of a primary down-trend. Breach of support at 78.50 would complete a head-and-shoulders reversal with a target of 74*.
* Target calculation: 79 – ( 84 – 79 ) = 74