Category: Forex

Coverage of all major currencies and the US Dollar Index.

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Crude rallies while gold and commodities stall

Gold is consolidating in a narrow range below resistance at $1300 — a bullish sign. Upward breakout would penetrate the descending trendline, suggesting a bottom is forming.  Reversal below $1270, however, would indicate another test of $1200. Failure of support at $1200 would offer a medium-term target of $1100*.

Spot Gold

* Target calculation: 1200 – ( 1300 – 1200 ) = 1100

The monthly chart shows a primary trendline some way above current price action. Even a rally to $1400 would not disrupt the primary down-trend.
Spot Gold

Dollar Index

The Dollar Index retreated after a false break above 84.00. Respect of the rising trendline would indicate the primary up-trend is intact, while reversal below 79.00 would signal a primary down-trend. Recovery above 84.50 would signal an advance to 89.00.
Dollar Index

Crude Oil

Nymex WTI light crude is in a clear primary up-trend, with Brent crude lifting in sympathy. Rising Nymex crude prices reflect a stronger US economy. Target for the Nymex advance is the 2012 high of $110/barrel*. Expect the spread with Brent crude to narrow.

Brent Crude and Nymex Crude

* Target calculation: 98 + ( 98 – 86 ) = 110

Commodities

The Shanghai Composite Index rebounded weakly above long-term support at 1950, but is likely to re-test in the next few weeks. Failure would indicate a decline to test the 2008 low at 1400. China is the primary driver of commodity prices and another decline on the Shanghai Index would drag prices even lower. Dow Jones-UBS Commodity Index reversal below long-term support at 125 would confirm, targeting the 2009 low at 100*. Not good news for Australian resources stocks, even if the impact is cushioned by a falling Aussie Dollar.

Dow Jones UBS Commodities Index

* Target calculation: 125 – ( 150 – 125 ) = 100

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Forex: Dollar falls sharply against Euro, Aussie, Loonie and Yen

The dollar fell sharply against the Euro and Sterling. The Euro jumped from primary support at $1.28 to medium-term resistance at $1.32. Breakout above $1.32 would suggest a primary advance, with a target of $1.40* — confirmed if resistance at $1.34 is broken. But oscillation of 63-day Twiggs Momentum around zero does not indicate a strong trend and respect of resistance is just as likely.

Euro/USD

* Target calculation: 1.34 + ( 1.34 – 1.28 ) = 1.40

Pound Sterling is weakening against the euro, breach of medium-term support at €1.16 suggesting a test of primary support at €1.1350 on the weekly chart. A 13-week Twiggs Momentum peak below zero would indicate a strong primary down-trend. Breach of primary support would offer a target of the 2011 low at €1.10.
Pound Sterling

The greenback retreated below support at ¥100 against the Yen. Recovery above ¥100 would indicate continuation of the advance, with a target of ¥114*. Respect of the new resistance level, however, remains as likely and would warn of a test primary support at ¥94.

USD/JPY

* Target calculation: 104 + ( 104 – 94 ) = 114

Canada’s Loonie broke resistance at $0.96, suggesting a rally to the descending trendline and resistance at $0.9850 against the greenback. Reversal below $0.96, however, would warn that all bets are off and another test of  support at $0.9450 is likely. 63-Day Twiggs Momentum oscillating below zero indicates a healthy primary down-trend.

Canadian Loonie

The Aussie Dollar penetrated its secondary descending trendline, suggesting a rally to test the primary trendline at $0.96. But first we need a break of resistance at $0.93, while follow-through above $0.94 would strengthen the signal. Respect of resistance, however, would warn of another test of immediate support at $0.90, while the long-term target remains at $0.80* against the greenback. The RBA is not averse to this: they need a softer dollar to cushion the impact of falling commodity prices.

Aussie Dollar

* Target calculation: 0.95 – ( 1.10 – 0.95 ) = 0.80

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Gold lifts on Dollar’s sharp fall

Gold broke medium-term resistance at $1260 as the Dollar Index fell sharply. Expect strong resistance between $1300 and 1340, however, and respect of the descending trendline would indicate another test of $1200. Continuation of the down-trend is likely, and failure of support at $1200 would offer a medium-term target of $1100*.

Spot Gold

* Target calculation: 1200 – ( 1300 – 1200 ) = 1100

Dollar Index

The dollar fell sharply on Wednesday as investors , hoping for greater clarity, received mixed (if not confusing) signals. Nicole Hong at WSJ writes:

Fed Chairman Ben Bernanke said at a conference that the central bank’s highly monetary policy [QE] is needed for the foreseeable future. He added that it is likely the Fed won’t raise interest rates “for some time,” even after the unemployment rate reaches 6.5%.

His remarks came after the release of minutes from the Fed’s June meeting earlier Wednesday. The minutes showed Fed officials divided about the timing of a reduction in bond buying, with half of Fed officials believing the central bank should end the stimulus program by the end of this year. Other Fed officials said the labor market hasn’t improved enough to begin tapering so soon.

The Dollar Index fell sharply, signaling another test of primary support at 80.50. Breach of support — or reversal of Twiggs Momentum (63-day or 13-week) below zero — would warn of a primary down-trend.  While that is unlikely, failure to break resistance at 84.50 suggests a weak up-trend.
Dollar Index

Crude Oil

Nymex WTI light crude followed through above $100/barrel, signaling a primary up-trend, while Brent crude recovered above $106/barrel. The spread has narrowed to less than $2/barrel. Rising Nymex crude prices reflect a stronger US economy. Target for the advance is the 2012 high of $110/barrel*.

Brent Crude and Nymex Crude

* Target calculation: 98 + ( 98 – 86 ) = 110

Commodities

Commodity prices are largely driven by China. Narrow consolidation of the Shanghai Composite index above long-term support at 1950 suggests a decline to test the 2008 low at 1700. That would drag commodities even lower. Dow Jones-UBS Commodity Index similarly recovered above long-term support at 125 and is likely to test 130, but  reversal below support would target the 2009 low at 100*. Not good news for Australian resources stocks, even if the impact is cushioned by a falling Aussie Dollar.

Dow Jones UBS Commodities Index

* Target calculation: 125 – ( 150 – 125 ) = 100

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Forex: Euro hesitant while Aussie falls

The euro is testing support at $1.30, representing a two-thirds retracement of the previous advance. Follow-through below $1.2950 would signal another test of primary support at $1.28 — and a ranging market — while respect of $1.30 would suggest a primary advance to $1.36*. Recovery of 63-day Twiggs Momentum above zero would be a bullish sign.

Euro/USD

* Target calculation: 1.30 + ( 1.34 – 1.28 ) = 1.36

Pound Sterling is ranging between €1.16 and €1.19 against the euro. Upward breakout — and penetration of the descending trendline — would signal a primary advance to €1.22*. But breach of support at €1.16 would indicate another test of primary support at €1.14, while a 13-week Twiggs Momentum peak below zero would suggest continuation of the primary down-trend.
Pound Sterling

The greenback retraced to test the new support level at ¥100 against the Yen. Respect, indicated by follow-through above ¥101, would re-test resistance at ¥103 to ¥104. But reversal below ¥99 seems as likely, and would re-test primary support at ¥94.

USD/JPY

* Target calculation: 104 + ( 104 – 94 ) = 114

Canada’s Loonie is testing support at $0.95 against the greenback. Follow-through below $0.9450 is likely and would signal another decline, with a target of $0.9350*. 63-Day Twiggs Momentum oscillating below zero indicates a strong primary down-trend.

Canadian Loonie

* Target calculation: 0.96 – ( 0.9850 – 0.96 ) = 0.9350

The Aussie Dollar continues to fall, with an immediate target of $0.90* and a long-term target of $0.80* against the greenback. The RBA is cheering this on as they need a softer dollar to cushion the impact of a down-turn in commodity prices.

Aussie Dollar

* Target calculation: 0.92 – ( 0.94 – 0.92 ) = 0.90; 0.95 – ( 1.10 – 0.95 ) = 0.80

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Gold and commodities bear rally likely to fail

Gold found support at $1200/ounce, but the rally was short-lived, encountering resistance at $1260. Breakout would test resistance at $1300/1320, while reversal below $1230 would again test $1200. Continuation of the down-trend is likely, and failure of support at $1200 would offer a medium-term target of $1100*.

Spot Gold

* Target calculation: 1200 – ( 1300 – 1200 ) = 1100

The Gold Bugs index (representing un-hedged gold stocks) diverged from the spot price in 2012 and retreated, relatively, a lot further since 2011. Does that mean the spot price will follow — or that gold stocks are oversold? I have no idea how far gold will eventually fall, but I do take this as a bearish sign for the metal.
Spot Silver

Crude Oil

Nymex WTI light crude broke resistance at $98/barrel and follow-through above $100 would confirm a primary up-trend. Brent continues to range between $100 and $106, with the spread narrowing to less than $4/barrel. Rising Nymex crude prices reflect a stronger US economy, and should ensure the spread closes completely in the months ahead.

Brent Crude and Nymex Crude

Commodities

Commodity prices are largely driven by Chinese demand, as reflected by the correlation between Dow Jones/UBS Commodity Index and the Shanghai Composite. The Shanghai is in a strong primary down-trend and likely to drag commodities even lower. Breakout below support at 125/126 would offer a long-term target of the 2009 low at 100*. Not good news for Australian resources stocks, even though the impact is cushioned by a falling Aussie Dollar.

Dow Jones UBS Commodities Index

* Target calculation: 125 – ( 150 – 125 ) = 100

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Dollar strengthens while bonds fall

The Dollar Index is headed for a test of resistance at 84.00/84.50. Respect of the rising trendline indicates a healthy up-trend — as does the 13-week Twiggs Momentum trough above zero. Breakout above 84.50 offer a long-term target of the 2010 high at 89*.

Dollar Index

* Target calculation: 84 + ( 84 – 79 ) = 89

Treasury yields are softening as the Fed talks down the prospect of ending QE, but the primary trend remains upward. Respect of support at 2.00% for 10-year Treasuries would indicate a healthy up-trend (for yields), while brief retracement that respects 2.30% would warn of sharply falling bond prices and further instability.

10-year Treasury Yields

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Forex: Euro falters while Aussie fall continues

The euro fell through support at $1.32 and is headed for a test of primary support at $1.27*. Failure of support would complete a broad head and shoulders reversal, offering a target of $1.17*. Descending 13-week Twiggs Momentum suggests a primary down-trend.

Euro/USD

* Target calculation: 1.27 – ( 1.37 – 1.27 ) = 1.17

Pound Sterling is headed for a test of support at $1.50 against the greenback. A 13-week Twiggs Momentum peak below zero suggests a primary down-trend. Failure of support at $1.50 would confirm.
Pound Sterling

The greenback is headed for a test of ¥100 against the Yen, after finding support at ¥94. The primary trend is upward and recovery above ¥100 would signal a fresh advance with a target of ¥114*. A 13-week Twiggs Momentum trough above zero would strengthen the signal. Respect of resistance at ¥100, however, would warn of reversal.

USD/JPY

* Target calculation: 104 + ( 104 – 94 ) = 114

Canada’s Loonie found support at $0.95 against the greenback, not $0.96 as expected. Recovery above $0.96 would suggest a rally to test the descending trendline around $0.98*.

Canadian Loonie

* Target calculation: 0.97 – ( 1.00 – 0.97 ) = 0.94

The Aussie Dollar displays a small flag as it rallies to test resistance at $0.94 against the greenback. Respect of resistance is likely and would suggest a decline to $0.90*.

Aussie Dollar

* Target calculation: 0.92 – ( 0.94 – 0.92 ) = 0.90

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Gold and commodities fall as the dollar rises

Gold is falling fast, but should find short/medium-term support at $1200/ounce*. Breach of that level would offer a target of $1000.

Spot Gold

* Target calculations: 1350 – ( 1500 – 1350 ) = 1200;  1500 – ( 1800 – 1500 ) = 1200

Silver similarly offers a target of $16/ounce*.
Spot Silver

* Target calculation: 26 – ( 36 – 26 ) = 16

Dollar Index

The Dollar Index respected its primary trendline at 80.50 and is headed for another test of 84. The 13-week Twiggs Momentum trough above zero suggests a strengthening up-trend. Target for a breakout would be the 2010 high at 89*.

Dollar Index

* Target calculation: 84 + ( 84 – 79 ) = 89

Crude Oil

Crude is range-bound, with Nymex WTI retreating after a false break above resistance at $98/barrel and Brent testing support at $100. The spread has narrowed to $6 and is likely to close further as the US economy recovers faster than Europe. Brent is in a down-trend, while Nymex continues to threaten a primary up-trend, reflecting the stronger US economy.

Brent Crude and Nymex Crude

Commodities

The Dow Jones/UBS Commodity Index is falling hard, more in sympathy with gold than with crude, as the dollar strengthens. A rapidly weakening Chinese economy is likely to drag commodity prices even lower. Breakout below long-term support at 125/126 would offer a target of the 2009 low at 100*.

Dow Jones UBS Commodities Index

* Target calculation: 125 – ( 150 – 125 ) = 100

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Forex: Euro retraces but Sterling weakens on the cross

The euro is retracing to test the new support level at $1.32, respect would confirm the advance to $1.37*.

Euro/USD

* Target calculation: 1.32 + ( 1.32 – 1.27 ) = 1.37

Pound Sterling is testing support at €1.16 against the euro. Failure would indicate a decline to primary support at  €1.14 , with a longer term target of €1.10. A 13-week Twiggs Momentum peak below zero would strengthen the bear signal.
Pound Sterling

The greenback found support at ¥94 against the Yen. The primary trend is still upward and recovery above ¥100 would signal a fresh advance with a target of ¥114*. A 13-week Twiggs Momentum trough above zero would strengthen the signal. Respect of resistance at ¥100, however, would warn of reversal.

USD/JPY

* Target calculation: 104 + ( 104 – 94 ) = 114

Canada’s Loonie respected resistance at $0.99 against the greenback and is headed for another test of support at $0.96. Successive peaks below zero on 13-week Twiggs Momentum indicate a healthy primary down-trend. Breach of  $0.96 would offer a target of $0.93*.

Canadian Loonie

* Target calculation: 0.96 – ( 0.99 – 0.96 ) = 0.93

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Gold falls while Treasury yields rise

Gold is testing primary support at $1340/ounce. Breach of support would signal another primary decline, while follow-through below $1320 would confirm.

Spot Gold
Declining 13-week Twiggs Momentum below zero indicates a healthy primary down-trend. Breach of primary support would offer a target of $1100*.
Spot Gold

* Target calculation: 1300 – ( 1500 – 1300 ) = 1100

Silver displays a similar down-trend on the monthly chart, offering a target of $16/ounce*.
Spot Silver

* Target calculation: 26 – ( 36 – 26 ) = 16

Dollar Index

The Dollar Index respected its primary trendline at 80.50 on the weekly chart. Recovery above 81.50 would indicate another test of 84. Declining peaks on 13-week Twiggs Momentum, however, suggest a weak up-trend. Failure of support at 80.50 would warn of another test of primary support at 79.

Dollar Index

Treasuries

Treasuries fell, with yields rising sharply after today’s FOMC announcement. Target for the advance of 10-year Treasury Yields is 2.60%*.

10-Year Treasury Yields

* Target calculation: 2.10 + ( 2.10 – 1.60 ) = 2.60

Crude Oil

Crude is rising despite the stronger dollar, with Nymex WTI breaking resistance at $98/barrel and Brent testing resistance at $106. The spread between the two has narrowed to around $8 and is likely to close further as the US economy recovers faster than Europe. Follow-through of Nymex crude above $100/barrel would confirm a primary up-trend, reflecting a stronger US economy — if the dollar is strengthening.

Brent Crude and Nymex Crude

Commodities

The Dow Jones/UBS Commodity Index, assisted by crude oil, found support at 130 on the weekly chart. Expect a test of the declining trendline at 134, but the primary trend is down and, with China weakening, a test of  primary support at 125/126 remains likely.

Dow Jones UBS Commodities Index

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