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December 15, 2011

Forex update: Euro breaks support

The euro broke through primary support at $1.32, warning of another primary decline with a target of $1.22*. Declining 63-day Twiggs Momentum indicates a strong primary down-trend.
Euro

* Target calculation: 1.32 – ( 1.42 – 1.32 ) = 1.22

Pound Sterling is testing primary support at $1.54, while 63-day Twiggs Momentum is below zero. Failure of support would signal a primary decline to $1.46.

Pound Sterling

* Target calculation: 1.54 – ( 1.62 – 1.54 ) = 1.46

The Aussie Dollar retreated below parity, indicating another test of medium term support at $0.97. Failure would test primary support at $0.94/$0.95. Respect of the zero line by 63-day Twiggs Momentum indicates a continuing primary down-trend. Weakening commodity prices, especially coal and iron ore, should strengthen the down-trend.

Australian Dollar

* Target calculation: 0.97 – ( 1.03 – 0.97 ) = 0.91

The Canadian Loonie is headed for a test of primary support at $0.94/$0.95. 63-Day Twiggs Momentum holding below zero suggests a continuing primary down-trend.

Canadian Dollar

* Target calculation: 0.95 – ( 1.00 – 0.95 ) = 0.90

A monthly chart of the Greenback against the Yen shows strong bullish divergence on 63-day Twiggs Momentum, suggesting reversal of the primary down-trend. Breakout above ¥80 and the descending trendline would confirm the signal.

Japanese Yen

The US Dollar continues in a strong up-trend against both the South African Rand and Brazilian Real, helped by falling commodity prices. Breakout above R8.60 would signal a further advance to R9.20.

South African Rand and Brazilian Real

* Target calculation: 8.60 + ( 8.60 – 8.00 ) = 9.20

December 15, 2011

Dollar breakout causes gold tremors

The Dollar Index broke through resistance at 80.00, signaling a primary advance to 85.00. Rising 63-day Twiggs Momentum indicates a strong up-trend.

Dollar Index

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

The stronger dollar caused spot gold to weaken, testing the band of support between $1550 and $1600/ounce.

Spot Gold

Gold is also testing the lower trend channel on the weekly chart. Cross of 63-day Twiggs Momentum below zero warns of a trend reversal. Failure of support at $1550 would confirm a primary down-trend.

Spot Gold Weekly

* Target calculation: 1600 – ( 1800 – 1600 ) = 1400

CRB Commodities Index is similarly testing support at 292. Breakout would offer a target of 265*.

CRB Commodities Index

* Target calculation: 295 – ( 325 – 295 ) = 265

Brent Crude is testing medium-term support at $105/barrel. Failure would indicate a test of the lower trend channel.

ICE Brent Afternoon Markers

Some readers questioned why gold and stocks are falling simultaneously — one normally rises when the other falls. A possible explanation is that expectation of quantitative easing, both from the Fed and ECB, has been supporting both markets. As prospects of QE recede, inflation forecasts will be lowered and demand for inflation-hedge assets (stocks and commodities) will fade. We should see a corresponding rise in bond prices (and falling yields) as a result.

December 8, 2011

Forex update

The euro is likely to re-test primary support at $1.32 against the greenback. Declining 63-day Twiggs Momentum, below zero, warns of continuation of the primary down-trend. Breach of support would indicate a primary decline to $1.22*.

EURUSD

* Target calculation: 1.32 – ( 1.42 – 1.32 ) = 1.22

Sterling rallied off primary support at $1.53/$1.54 against the greenback but 63-day Twiggs Momentum again warns of a primary down-trend. Failure of support would offer a target of $1.46*.

GBPUSD

* Target calculation: 1.53 – ( 1.60 – 1.53 ) = 1.46

Canada’s Loonie is headed for another test of resistance at $1.01 against the greenback. Declining 63-day Twiggs Momentum, however, continues to warn of a primary down-trend. Respect of resistance is likely, and would signal another test of primary support at $0.95. Declining commodity prices also favor a down-trend.

CADUSD

* Target calculation: 0.95 – ( 1.01 – 0.95 ) = 0.89

The Aussie Dollar appears stronger than the Loonie, which is unusual. Both are affected by commodity prices, but the Aussie tends to be more volatile than its Canadian counterpart. Obviously, higher interest rates in the Southern hemisphere are an attraction. Again, 63-day Twiggs Momentum warns of a primary down-trend. And reversal below parity would warn of another test of primary support at $0.95.

AUDUSD

* Target calculation: 0.95 – ( 1.07 – 0.95 ) = 0.83

The greenback has strengthened sharply against the South African Rand and Brazilian Real. Both volatile, resource-rich currencies are likely to re-test their recent highs: the rand at R8.50 and the real at 1.90 against the dollar.

USDZAR

The greenback shows strong bullish divergence against Japan’s yen on 63-day Twiggs Momentum, warning of a reversal. Breach of the long-term descending trendline would strengthen the signal. Breakout above ¥80 would confirm.

USDJPY

December 8, 2011

Safe haven demand for dollar and gold eases

The Dollar Index is testing support at 78.00. Narrow consolidation above the support level indicates weakness. Recovery above 79.00 would relieve this, while failure of support would warn of another test of primary support at 75.00. Rising 63-day Twiggs Momentum, well above zero, however, suggests continuation of the up-trend.

Dollar Index

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

Spot gold is also weak as safe haven demand for both the yellow metal and the dollar has eased. Reversal below $1670 would signal another test of primary support at $1600. Declining 63-day Twiggs Momentum suggests further weakness but the long-term outlook remains bullish with the indicator comfortably above the zero line.

Spot Gold

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

Increased tensions with Iran are supporting the price of Brent Crude above $105/barrel. Narrow oscillation of 63-day Twiggs Momentum around the zero line indicates uncertainty. Failure of support (and respect of the descending trendline) would indicate another primary decline with a target of $85*. Breach of primary support at $99 would confirm.

ICE Brent Crude Afternoon Markers

* Target calculation: 100 – ( 115 – 100 ) = 85

The CRB Commodities Index respected its descending trendline, suggesting a primary decline to $265*. Follow-through below short-term support at $305 would strengthen the signal, while breach of primary support at $295 would confirm. The Aussie Dollar and Canada’s Loonie both closely follow commodity prices and can be expected to follow the CRB index lower.

CRB Commodities Index

* Target calculation: 295 – ( 325 – 295 ) = 265

November 30, 2011

Aussie dollar strengthens

The Aussie dollar recovered above parity, breach of the declining trendline indicating that the correction is over. Breakout of the CRB Commodities Index above 325 would be a bullish sign, suggesting another test of $1.08 against the greenback. Breakout above $1.08 remains unlikely, but would offer a long-term target of 1.20*.

AUDUSD

* Target calculation: 1.08 + ( 1.08 – 0.96 ) = 1.20

November 30, 2011

Dollar weakens on euro bank rescue

The Dollar Index is retracing after a strong rally over the last few weeks. Respect of support at 78.00 would indicate buying pressure, favoring a breakout above 80.00. Breakout would signal another primary advance — with a target of 85.00*.

US Dollar Index

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

November 24, 2011

Commodities drag Aussie and Canadian dollar lower

Commodities are weakening and dragging the Aussie and Loonie lower. The Aussie dollar shows a similar iceberg pattern on 63-day Twiggs Momentum, warning of a primary down-trend. Breakout below primary support at $0.94 would offer a long-term target of $0.80*.

AUDUSD

* Target calculation: 0.94 – ( 1.08 – 0.94 ) = 0.80

Canada’s Loonie is also headed for a test of $0.94 against the greenback. The peak below zero on 63-day Twiggs Momentum indicates a strong down-trend. Failure of primary support (0.94) would offer a target of $0.87*.

CADUSD

* Target calculation: 0.94 – ( 1.01 – 0.94 ) = 0.87

November 24, 2011

Dollar strength continues

The Dollar Index is headed for a test of resistance at 80. The brief dip below zero on 63-day Twiggs Momentum suggests a solid primary up-trend. Breakout above 80 would offer a target of 85*.

US Dollar Index

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

November 17, 2011

Brazilian Real and South African Rand

The Brazilian Real has fallen sharply against the greenback since the government took measures to stem the inflow of funds on capital account. Breach of medium-term support at $0.56 would indicate respect of the descending trendline and another test of primary support at $0.52. In the long-term, failure of primary support would warn of a fall to $0.40.

Brazilian Real

* Target calculation: 0.52 – ( 0.64 – 0.52 ) = 0.40

The South African Rand is weakening against both the US and Aussie dollar. The Aussie (another resources currency) shows an accelerating up-trend against the Rand. Breakout above R8.30 would signal an advance to R9.00*. Accelerating up-trends, however, inevitably lead to blow-offs — as in 2008.

South African Rand

* Target calculation: 7.50 + ( 7.50 – 6.00 ) = 9.00

November 17, 2011

Aussie and Loonie test support

The Aussie is testing support at parity against the greenback. The “iceberg” on 63-day Twiggs Momentum indicates a primary down-trend. Failure of parity would test primary support at $0.94 and, in the long-term, breach of primary support would signal a decline to $0.80*.

AUDUSD

* Target calculation: 0.94 – ( 1.08 – 0.94 ) = 0.80

63-Day Twiggs Momentum indicates a stronger down-trend on Canada’s Loonie. Failure of support at $0.975 would test primary support at $0.94 and, in the long-term, breach of the $0.94 level would signal decline to $0.80*.

CADUSD

* Target calculation: 0.94 – ( 1.01 – 0.94 ) = 0.87

The Aussie and Loonie normally move in sympathy with the CRB Commodities Index and a CRB break of its primary down-trend would warn of a reversal on the above two currencies.