Tag: Dollar Index

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Gold resurgent despite stronger Dollar

The Fed has signaled a “patient approach” to raising interest rates, causing long-term yields to fall. Ten-year Treasury Note yields broke primary support at 2.00%, signaling another test of the 2012 low at 1.40%. Declining 13-week Twiggs Momentum below zero confirms continuation of the down-trend. Recovery above 2.00% is unlikely, but would warn that the down-trend of the last 12 months is ending.

10-Year Treasury Yields

The Dollar Index is headed for a test of long-term resistance at 100. Rising 13-week Twiggs Momentum signals a strong (primary) up-trend. Retracement to test support at 90 remains a possibility, but the likelihood of reversal below this level is remote.

Dollar Index

* Target calculation: 90 + ( 90 – 80 ) = 100

Gold

Despite the rising Dollar, Gold continues to test resistance at $1300/ounce. Breakout would signal a rally to $1400/ounce, but trend reversal is unlikely. Retreat below $1200 would confirm a long-term target of $1000*.

Spot Gold

* Target calculation: 1200 – ( 1400 – 1200 ) = 1000

The Gold Bugs Index, representing un-hedged gold stocks, displays a similar picture. Breakout above 200 would signal a rally to test the declining trendline around 250, but reversal of the primary down-trend is unlikely.

Gold Bugs Index

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Gold is rising despite a strong Dollar

Gold is strengthening despite falling oil prices and the rising Dollar.

The Dollar Index is advancing toward a long-term target of 100 after breaking resistance at 90 in December.
Dollar Index

* Target calculation: 90 + ( 90 – 80 ) = 100

Spot gold is testing resistance at $1300/ounce after breaking through $1250. Expect a rally to test resistance at $1400, but a change in the primary trend is unlikely. Reversal below $1200 would warn of a decline to $1000*.
Gold

* Target calculation: 1200 – ( 1400 – 1200 ) = 1000

The most likely explanation for gold strength is the prospect of significant quantitative easing by the European Central Bank. Mario Draghi has called on the ECB to purchase € 50 billion of securities per month until December 2016 according to Bloomberg. With Japan and China already following the path of monetary expansion, concerns over the potential for a “currency war” are growing.

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Dollar rises as yields fall

Flight to safety is driving demand for the Dollar, with the Dollar Index breaking resistance at 90 to signal a long-term up-trend.

Dollar Index

Long-term Treasury yields are falling in response to a lower inflation outlook. But foreign Treasury purchases may also be a contributing factor, with China seeking to protect its advantage in export markets.

10-Year Treasury Yields

Expect strong support at 1.40 to 1.50 percent. Yields are unlikely to fall below that level unless there is a serious risk of deflation. Recovery above 3.0 percent appears some way off, but would warn that the 30-year secular bull market in bonds is coming to an end.

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Gold and Inflation

The Dollar Index is testing long-term highs at 90. Breakout is likely and would suggest a strong bull trend.

Dollar Index

One reason is falling inflation expectations, with the Breakeven Rate (5-year Treasury yield minus equivalent TIPS yield) testing its 5-year low. Further falls would increase pressure on the Fed to raise interest rates.

Breakeven Rate

A strong Dollar and low inflation both weaken gold prices. Declining 13-week Twiggs Momentum, below zero, suggests a strong down-trend. Follow-through below $1180/ounce would confirm this.

ASX 200 daily

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Stronger dollar, weaker gold

Ten-year Treasury Note yields retreated below 2.30%, signaling another test of primary support at 2.00%. Declining 13-week Twiggs Momentum below zero suggests a continuing down-trend. Recovery above 2.40% is unlikely, but would warn of a rally to 2.65%.

10-Year Treasury Yields

* Target calculation: 2.30 – ( 2.60 – 2.30 ) = 2.00

The Dollar Index is testing resistance at its 2008/2010 highs between 88 and 90. Rising 13-week Twiggs Momentum indicates a healthy (primary) up-trend. Expect retracement or consolidation below resistance, but failure of support at 84 is unlikely.

Dollar Index

* Target calculation: 84 + ( 84 – 79 ) = 89.00

Gold

Low inflation and a strong dollar reduce demand for gold. Low interest rates reduce the carrying cost of gold, but the appeal is muted when inflation expectations remain low. Gold is testing its new resistance level at $1200/ounce. Respect is likely and would confirm a long-term target of $1000*. Declining 13-week Twiggs Momentum below zero indicates a strong down-trend.

Spot Gold

* Target calculation: 1200 – ( 1400 – 1200 ) = 1000

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Dollar rising, Treasury yields trend lower

The rally in ten-year Treasury Note yields continues. Expect resistance at 2.50% (the descending trendline). Respect would warn of another test of primary support at 2.00%. 13-Week Twiggs Momentum below zero continues to signal a primary down-trend.

10-Year Treasury Yields

* Target calculation: 2.30 – ( 2.60 – 2.30 ) = 2.00

A monthly chart of the Dollar Index places the current advance in its long-term context. Expect resistance at 88 to 90, with a possible correction to test support at 84. But the primary trend is up and breakout above 90 would offer a long-term target of 105. Rising 13-week Twiggs Momentum suggests a healthy (primary) up-trend. Failure of support at 84.50 is unlikely.

Dollar Index

* Target calculation: 84 + ( 84 – 79 ) = 89.00

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Dollar rising as Treasury yields recover

The yield on ten-year Treasury Notes recovered above the former support level at 2.30%, suggesting another test of 2.50% and the descending trendline. Reversal below 2.30%, however, would warn of another test of primary support at 2.00%. 13-Week Twiggs Momentum below zero continues to signal a primary down-trend.

10-Year Treasury Yields

* Target calculation: 2.30 – ( 2.60 – 2.30 ) = 2.00

The Dollar Index respected its new support level at 84.50 and recovery above 86.5 would confirm a primary advance to 89*. Rising 13-week Twiggs Momentum suggests a healthy (primary) up-trend. Failure of support at 84.50 is unlikely, but would warn of correction to the primary trendline.

Dollar Index

* Target calculation: 84 + ( 84 – 79 ) = 89.00

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Treasury yields fall and the Dollar finds support

The yield on ten-year Treasury Notes is in a primary down-trend (since breaking support at 2.50%). Expect retracement to test resistance at 2.30%. Respect is likely and would indicate another test of primary support at 2.00%*. A 13-week Twiggs Momentum peak below zero signals bear strength. Recovery above 2.30 is unlikely, but would test the descending trendline and resistance at 2.50%.

10-Year Treasury Yields

* Target calculation: 2.30 – ( 2.60 – 2.30 ) = 2.00

Inflation expectations are falling, with the 5-year inflation breakeven rate (5-year treasury yields minus the 5-year TIPS rate) now close to 1.4%.

5-Year Inflation Breakeven Rate

The Dollar Index respected its new support level at 84.50. Recovery above 86.5 would confirm a primary advance and a target of 89*. Rising 13-week Twiggs Momentum suggests a healthy (primary) up-trend. Failure of support at 84.50 is unlikely, but would warn of a correction to the primary trendline.

Dollar Index

* Target calculation: 84 + ( 84 – 79 ) = 89.00

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Treasury yields plunge

The yield on ten-year Treasury Notes broke primary support at 2.00%, plunging to a low of 1.86% in the morning before recovering to 2.10% at the close. Expect strong support at 2.00*. 13-Week Twiggs Momentum (below zero) has been warning of a primary down-trend for some time. Recovery above 2.30 is unlikely at present.

10-Year Treasury Yields

* Target calculation: 2.30 – ( 2.60 – 2.30 ) = 2.00

Falling inflation expectations are behind the drop, with the 5-year inflation breakeven rate — 5-year treasury yields minus the 5-year TIPS rate — making a new 2-year low.

5-Year Inflation Breakeven Rate

A falling dollar suggests that domestic purchases are driving the surge in Treasury prices, rather than international buyers. The Dollar Index is testing its new support level at 84.50. Respect would confirm a primary advance with a target of 89*. Rising 13-week Twiggs Momentum continues to indicate a healthy (primary) up-trend. Failure of support at 84.50 is unlikely, but breach of the secondary trendline would warn of a correction to the primary (trendline).

Dollar Index

* Target calculation: 84 + ( 84 – 79 ) = 89.00

Low interest rates strengthen demand for gold as they reduce the carrying cost.

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Dollar and interest outlook fall

The Dollar Index is retracing to test its new support level at 84.50. Respect would confirm a primary advance with a target of 89*. Rising 13-week Twiggs Momentum continues to indicate a healthy primary up-trend. Failure of support (84.50) is unlikely, but breach of the secondary trendline would warn of a correction to the primary line.

Dollar Index

* Target calculation: 84 + ( 84 – 79 ) = 89.00

The yield on ten-year Treasury Notes is again testing primary support at 2.30. Breach would signal a decline to 2.00*. A 13-week Twiggs Momentum peak below zero suggests a continued primary down-trend. Recovery above 2.65 is unlikely, but would indicate an advance to 3.00.

10-Year Treasury Yields

* Target calculation: 2.30 – ( 2.60 – 2.30 ) = 2.00

Low interest rates would weaken the Dollar and strengthen demand for gold.

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