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.
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He founded PVT Capital (AFSL number 546090), which provides income and growth strategies to wholesale clients.
Colin also co-founded Incredible Charts and writes the popular Patient Investor newsletter.
Using a top-down approach, Colin identifies macro trends in the global economy and then combines fundamental and technical analysis to evaluate opportunities in sectors that stand to benefit.
Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
“A rising Dollar Index is testing resistance at 81.50. Respect of resistance would threaten to complete 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.”
The chart for the ” 63-day Twiggs Momentum” is missing. I do not see it falling “below zero, already ” on my chart.
yes, where is the 63 day ocsillator?