The chart above shows the Gold price for the past 5 years. The study applies basic tools to analyze the current price action on Gold. The tools are two long term moving averages, trend lines and the Bollinger Band Width Indicator. Both the 100 and 200 day moving averages were strong support during the up trends. During the consolidation period between 2006 and 2007, the moving averages were almost flat. The contracting range formed a symmetrical triangle. During the same time period, Bollinger band width decreased to low levels signaling very low volatility.

In the last two years, Gold moved in a wide range between $1,035 and $700. Since the beginning of 2009, the lower highs and higher lows formed another contracting range which might turn into a triangle in the following months. The Bollinger band width indicator declined to extreme low volatility levels signaling a possible increase in trading activity in the following months. In the first half of 2009, Gold tested the long term moving averages twice and in both cases found support and rebounded to higher levels. The lower boundary of the contracting range and the long term moving averages at $900-$930 range are strong support. The upper boundary of the consolidation range at $1,000 and the historical high level at $1,035 are strong intermediate/long term resistances.

EUR / USD

The chart above analyzes the EUR/USD cross rate for the past one year. Since the beginning of March 2009, the EUR has been gaining strength against the USD. In the last one month, the EUR/USD formed a symmetrical triangle between 1.43 and 1.38. Currently the upper boundary of the contracting range is at 1.4150 and the lower boundary is at 1.3900. We will see a breakout to one direction in the following days. The 50 & 100 period moving averages are strong support between 1.37 and 1.39 levels.

AUD / USD

The chart above analyzes the AUD/USD cross rate. Similar to the EUR, the AUD is also strong against the USD. However in the last one month the choppy sideways action showed some weakness in the uptrend. The formation looks like a "flag" (a pause) in the strong uptrend. The AUD is now testing the upper boundary of this short term consolidation range at 0.808. A break above this level will signal another strong period for the AUD.

USD INDEX

The chart above analyzes the US dollar index for the past two years. US Dollar Index is a measure of the US Dollar relative to a majority of its significant trading partners. Currently the index is calculated by factoring the exchange rates of six major world currencies: the euro, Japanese yen, Canadian dollar, British pound, Swedish krona and Swiss franc.

Since the beginning of March 2009, the dollar index has been in a downtrend against its major trading partners. In the last one month the index formed a clear symmetrical triangle and recently it broke down the lower boundary of the triangle at 79.80. Unless this is a false breakdown, the next target for the dollar index will be 77.60.

Aksel Kibar, CMT
Portfolio Manager
Abu Dhabi Investment Company PJSC
www.investad.ae/en/Home.aspx

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