Tag: trend channel

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Commodities point to weaker Aussie and Canadian Dollar

CRB Commodities Index is testing support at 300 and the lower border of its trend channel. 63-day Twiggs Momentum holding below zero indicates a strong primary down-trend. Breakout below the trend channel would warn of a sharp decline, with a target of 260*. Respect is less likely, but would indicate a rally to test the upper trend channel.

CRB Commodities Index

* Target calculation: 300 – ( 340 – 300 ) = 260

Canada’s Loonie and the Aussie Dollar are both closely linked to commodity prices. A fall in the CRB index would lead to similar falls in the two currencies. CAD breakout below $0.9650 would signal a test of $0.94*.

CADUSD

* Target calculation: 1.00 – ( 1.06 – 1.00 ) = 0.94

Both currencies commenced a primary down-trend when they broke parity. An Aussie Dollar breakout below $0.97 would offer an identical target of $0.94*.

AUDUSD

* Target calculation: 1.02 – ( 1.10 – 1.02 ) = 0.94

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Copper warns of global recession

Copper has in the past proved a reliable indicator of the state of the global economy. Now it has gapped through primary support at 8500 and below its trend channel (drawn at 2 standard deviations around a linear regression line) on the weekly chart — warning of a global recession. The 63-day Momentum peak below zero also signals a bear market.

Copper

* Target calculation: 8500 – ( 10000 – 8500 ) = 7000

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Gold falls hard — not my best call

Spot gold broke support at $1700/ounce, falling hard to $1650. The calculated target is $1600* or $1500 depending on whether you take the base of the double top as $1750 or $1700.

Spot Gold

* Target calculation: 1750 – ( 1900 – 1750 ) = 1600

When you look at the trend channel on the weekly chart, however, it is likely that the sharp correction will overshoot the trend channel on the lower side. Possibly as low as $1300*.

Spot Gold Weekly

* Target calculation: 1500 – ( 1900 – 1700 ) = 1300

I have to eat my words from September 11: “With Europe awash with stories of the imminent default of Greece, and German banks told to prepare for a 50% haircut on Greek bonds, this would be a good time to buy gold.” Sure I qualified by warning that below $1800 all bets were off, but should have placed more emphasis on the overbought situation on the weekly chart and less on the approaching European tsunami.

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Aussie Dollar tests trend channel

The Australian Dollar is testing the lower border of its long-term (Raff Regression) trend channel against the greenback on a weekly chart. Expect strong support at parity. Recovery above $1.075 would suggest a rally to test the upper channel around $1.20*, while failure would warn of reversal to a primary down-trend.

AUDUSD

* Target calculation: 1.10 + ( 1.10 – 1.00 ) = 1.20

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Aussie stronger

The Aussie Dollar followed commodities higher, breaking through $1.06 to signal a test of resistance at $1.10. 63-Day Momentum holding above zero suggests continuation of the up-trend. In the long term, breakout above $1.10 would offer a target of $1.20* — though this is only likely if we see more quantitative easing from the Fed.

AUDUSD

* Target calculation: 1.10 + ( 1.10 – 1.00 ) = 1.20

The Aussie Dollar is testing the upper trend channel against its Kiwi counterpart; breakout would warn that the down-trend is weakening. Reversal below $1.245 would warn of a test of the lower trend channel.

AUDNZD

* Target calculation: 1.24 – ( 1.28 – 1.24 ) = 1.20

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Commodities: trend starts to bend

The CRB Commodities Index threatens a breakout above its trend channel, while 63-day Momentum crossed above zero. Neither is of much consequence yet, but retracement that respects support at 335, or a Momentum trough that respects the zero line, would warn that the down-trend is at an end.

RJ/CRB Commodities Index

* Target calculation: 315 – ( 330 – 315 ) = 300

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Aussie weaker

The Aussie Dollar continues to consolidate between $1.03 and $1.06 against the greenback. Failure of support at $1.03 would test parity, while breakout above $1.06 would target resistance at $1.10. In the long term, declining commodity prices are likely to drag the Aussie lower — unless the Fed starts printing money again.

Australian Dollar AUDUSD

* Target calculation: 1.03 – ( 1.06 – 1.03 ) = 1.00

The Aussie Dollar is testing the upper border of the declining trend channel against its Kiwi counterpart. Reversal below short-term support at $1.255 would indicate respect of the upper channel and a down-swing to around $1.20*. Breakout above $1.28 is unlikely but would warn that the down-trend is weakening.

New Zealand Dollar NZDUSD

* Target calculation: 1.24 – ( 1.28 – 1.24 ) = 1.20

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Will Bernanke pull the trigger?

Rising stocks and a sharp fall on spot gold reflect uncertainty as to whether Ben Bernanke will announce further quantitative easing by the Fed, at Jackson Hole, Wyo. on Friday. Further purchases of Treasurys by the Fed would lift inflation and send investors scrambling for inflation-hedges like gold and blue-chip stocks. Stocks are rising, but gold is falling. Could it be that promise of an end to the conflict in Libya makes the world a safer place — or that a resulting fall in oil prices would reduce inflationary pressures? Brent crude and the CRB Commodities Index are both rising, suggesting that  the precious metals blow-off is driven by profit-taking — after the sharp surge over the last few weeks and ahead of an uncertain announcement on Friday.

Spot gold is testing its secondary [green] rising trendline at $1700/$1720.  Support is likely to hold — especially if there is any hint of QE3 on Friday — but failure would warn of a fall to the long-term trendline around $1500/ounce.

Spot Gold

* Target calculation: 1900 + ( 1900 – 1700 ) = 2100

The monthly gold chart shows spot gold testing the upper trend channel of the long-term bull-trend. Correction to the lower channel would result in a substantial fall. A lot depends on what happens Friday.

Spot Gold - Monthly


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