"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput

Trader Dan's free work will soon be available at www.traderdan.biz

Thursday, July 17, 2014

Euro Continues Closing in on Key Chart Support

Those of you who have been following this blog for a while should be familiar with my view that the currency world has been rather erratic of late. Many of the majors are in trading range market without any clearly defined trend.

The Euro is no exception. It has been contained in a range bounded by 1.370 on the top and 1.350 on the bottom for the last 6 weeks. It has begun moving lower towards the bottom of the range this week however and is setting up therefore for an important test.

I have felt that the European Monetary Authorities are not comfortable with the Euro near the 1.40 level in relation to the Dollar. That was made abundantly clear by Draghi's talking down of the currency in early May when he first broached the topic of lowering interest rates and potential forms of monetary stimulus that might be employed by the ECB to get the Eurozone economy moving.

Traders took their cue from him and responded by selling the unit. However, the bears have as of yet been unable to take it down below 1.35 for some time now. This level is once again proving to be a key chart level that should be monitored.

Neither of the indicators noted are near their respective oversold zones so IF (and this is unknown ) the Euro can break below that zone, it has the room to run down another full point initially and perhaps as low as 1.330. If it does, it will confirm a trending move as it will have broken out of its range trade.

Time will make it clear.


  1. Jesse Livermore

    As I have just become aware of your post regarding Gary on July 16, I wanted to respond. I used to post on Dan's site but decided not to a couple of months ago as I had a little back and forth with him. No big deal, water under the bridge. I am not one of Gary's "dedicated disciples" who will "defend this clown". I'm not going to discuss any comments you specifically made about Gary, as he is a big boy and can defend himself, if he chooses to do so.
    I'm a subscriber on his site who you so eloquently described as "a retail sucker who can't trade or invest by themselves to save their life". I've been called worse. I have found the subscribers on his site to be very knowledgeable about the markets, and not just the "manipulated gold market", as many trade other commodities and the general stock market. Like most other sites, we exchange ideas about all the markets, and try to make ourselves better investors and traders. None of us knows everything about the markets.
    Personally, I don't use cycles, which is Gary's method of trading, or EW. Actually, I happen to use many of the same tools that Dan uses to trade. There are many subscribers on the site who, believe it or not, actually make their own decisions on their trades, and of course there are many who follow Gary's advice. If they are unhappy with his results, they can always cancel their subscription.
    This will be my only post, so feel free to rip me if you like, in any rebuttal. I have very thick skin.
    One last thing - Sir, you are no Jesse Livermore.

  2. Hello,

    I would also simply add that EURUSD prices have been contained in a rising wedge (see chart below) and we are, ô miracle, exactly testing its support at the exact same time and level at 1.35.
    Breaking down the rising wedge would be another reason for the EUR USD to push lower.
    Let's see, but it reinforces the importance of the 1.35 level.
    It also corresponds to a Fibonacci level at 1.3490... everything converges towards 1.35 at the moment :)


    Regarding GOLD, well we are bouncing precisely between the green mlh inf and the red resistance posted in a previous comment. So I'm still waiting and watching which one is going to break...


  3. Gold is looking insanely heavy at this point; if crashed airliners cant get it back up to where it was the day before the Crimean referendum, then I very much doubt any amount of geopolitical noise will. I am very, very long of Gild, but if it can hold 1250 from now until the end of Q3, I'll be astonished

    IMHO the crucial tipping point will be between 1267 and 1274, below which a big dark hole opens up

  4. This comment has been removed by a blog administrator.

    1. Capital Stars, shit website.
      Capital Staaaars, the website which is so shitty, it can't even spend a few pennies for its own advertising.
      Capital Stars, the website owned by a group of spammers who come here to spam Dan's blog.
      Capital Stars, the very example of the donk's website without morality, feeding on page viewed and number of visitors per months and delivering the poorest content.
      Thanks to Capital Stars to come spam us here to remind us the difference between a real free blog with relevant information from a real trader and a shitty website managed by buffoons who only want to make a profit, without any ethics.
      Come back, Shivah Verma.

    2. Hubert
      While I share your feelings I Shivah or who ever it is using the handle is impervious to our comments. Fell free to continue the thread to warn off those who would go to the site out of curiosity. Those clicks feed the spammers.

    3. Hi Mike,

      Yes, that's why I'm doing it and also maybe so their action be counterproductive. I hope every reader will soon remember about CapitalStars as the website to avoid visiting :) That would be a just reward for those spammers :)

  5. Is gold starting to shed it's security blanket status?
    Time and future events will be the judge of that.

    July 18, 2014, 7:59 a.m. EDT

    "Gold fails to hold onto safe-haven gains"

    Analysts: ETFs showing restraint when it come to gold

    By Barbara Kollmeyer, MarketWatch

    MADRID (MarketWatch) — The safe-haven benefits for gold faded on Friday, with the precious metal dropping in electronic trading, as a lack of physical follow-through made that upward move unsustainable, said analysts.

    Gold for August delivery GCQ4 -0.56% fell $5, or 0.4%, to $1,311.80 an ounce, after a 1.3% gain on Thursday after a Malaysia Airlines plane brought down in eastern Ukraine sent investors scrambling for safety. September silver SIU4 -0.71% also ceded ground after gaining 1.7% on Thursday. Silver fell 15 cents, or 0.7%, to $20.98 an ounce. Malaysian jet hit by missile, U.S. officials say.

    U.S. stock markets also had a tough day Thursday, with the S&P 500 index SPX -1.18% SPX -1.18% suffering its biggest one-day drop since April 10, a fall of 1.2%. But stock futures were indicating a less-dramatic session ahead, at least in the early going, and the lack of tension for stocks left gold pulling back.

    Frederic Panizzutti, CEO of MKS Precious Metals, said in emailed comments that gold is set to move back below $1,300 an ounce. Gold will be pressured as talks about possible interest-rate hikes in 2015 heat up over the coming months, especially if the U.S. jobs market improves further.

    Even if U.S. rates don’t change before the second quarter of next year, ”the upside potential for gold over the medium term will remain capped and we shall likely see some price pressure in the back of speculative selling, which could prompt mines to enter into a hedging cycle to secure their medium-long-term selling price,” Panizzutti said in those comments.

    Analysts said gold markets will continue to watch geopolitical events, especially ahead of the weekend, which could produce more headlines out of Russia and Ukraine over the downed jet and the Middle East, where Israel has launched a ground offensive in Gaza.

    Analysts at Commerzbank said fresh data showed exchange-traded funds are showing restraint when it comes to gold. The world’s biggest ETF, the SPDR Gold Trust GLD -0.02% recorded outflows of nearly 3 tons on Thursday, for the second day in a row.

    “This constitutes the biggest two-day reduction since early May, the first two weeks of July having still seen considerable inflows,” said the analysts.


  6. All the "collapse of everything is imminent" apostates will cringe at the following article.

    Rates going up is inevitable and the resulting USD/UST demand and strength will completely negate the "sudden collapse of the dollar" mantra out there.

    "Fed kicks off global dollar squeeze as Janet Yellen turns hawkish"

    By Ambrose Evans-Pritchard
    9:00PM BST 16 Jul 2014

    ~"A vast wash of dollars flooded the global financial system when the Fed cut rates near zero and then bought $3.5 trillion of bonds. This may now go into reverse"~

    The US Federal Reserve has begun to pivot.
    Monetary tightening is coming sooner than the world expected, with sober implications for overheated bourses, and for those in Asia, eastern Europe and Latin America that drank deepest from the draught of dollar liquidity.

    We can expect a blistering dollar rally, perhaps akin to the early 1980s or the mid-1990s. It is fortuitous that the BRICS quintet of Brazil, Russia, India, China and South Africa have just launched their $100bn monetary fund to defend each other's currencies. Some of them may need it.

    America's unemployment rate has fallen from 7.5pc to 6.1pc in 12 months. The country has been adding 230,000 jobs a month in the first half of this year.

    Since Fed chief Janet Yellen targets jobs above all else, this was bound to force capitulation by the Fed before long. It happened this week in her testimony to Congress. "If the labour market continues to improve more quickly than anticipated, then increases in the federal funds rate likely would occur sooner and be more rapid than currently envisioned," she said.

    This is a policy shift. Mrs Yellen has admitted that the Fed misjudged the pace of jobs recovery. The staff did not expect unemployment to fall this low until late next year. The inflexion point has come 15 months early.

    To some it feels like 2004, when the Greenspan Fed found itself badly behind the curve, suddenly switching from nonchalance in May to rate rises in June. "They may have left it too late again: the risk is a reckoning point when rates rise abruptly," said Jens Nordvig, from Nomura.

    Mrs Yellen added the usual caveats about "false dawns". Wages are barely rising. The jobs market is not yet drawing back the millions who dropped out of the system. The labour participation rate is still stuck at a 36-year low of 62.8pc, and at the lowest ever recorded for men. "The recovery is not yet complete. We need to be careful to make sure the economy is on a solid trajectory before we consider raising interest rates," she said.

    Yet she has undoubtedly changed gear. She no longer dismissed rising inflation (1.8pc) as "noise". She said share prices for biotech and social media companies were overheating, and that junk bonds were frothy. "Valuations appear stretched. We are closely monitoring developments in the leveraged loan market," she said.

    The critics may be getting to her. The Bank of International Settlements has rebuked the Fed for stoking asset bubbles. Some of her own voting committee are fretting. "I think we are going to overshoot on inflation,” said St Louis Fed chief James Bullard.

    Mrs Yellen is not as dovish as believed, in any case. Her lodestar is the "non-accelerating inflation rate of unemployment" (NAIRU), the point at which tight labour markets start to drive a wage-price spiral. She thinks this is near 5.4pc.

    When the rate is above NAIRU, she is a dove: when below, she is a hawk. She was one of the first to call for pre-emptive rate rises in 1996 to choke inflation, dissenting from the Greenspan Fed. Nobody thought of her as dovish then.
    Her argument until now is that most of the jobless surge since the Great Recession is "cyclical and not structural" and therefore treatable by monetary...(cont.)


    1. (cont)
      ...and therefore treatable by monetary stimulus. This is wearing thin. Skill shortages are cropping up everywhere. A Manpower survey of US firms found that 40pc are having trouble filling jobs. Total job openings have rocketed from 3.5m to 4.2m since January, the steepest rise in modern times.

      Quantitative easing has done its job, keeping growth alive as Congress and the White House pushed through the most draconian fiscal squeeze since the end of the Korean War. The economy did not fall back into recession, though it came close. It has achieved "escape velocity", of sorts.

      Yet if America is strong enough to withstand rate rises, it is far from clear what this will do to the rest of the world. A vast wash of dollars flooded the global financial system when the Fed cut rates near zero and then bought $3.5 trillion of bonds.

      This may now go into reverse.

      We still live in a dollarised world. Charles de Gaulle railed against the "exhorbitant privellege" of US dollar hegemony in the 1960s, but remarkably little has changed since. The BIS says global cross-border lending by banks alone has risen from $4 trillion to $10 trillion over the past decade, and $7 trillion of this is denominated in dollars. This does not include the dollar bond markets.

      What Fed now does arguably has more amplified effects than at any time since the end of gold and the collapse of the fixed-exchange Bretton Woods regime in 1971. This is the paradox of 21st century globalisation.

      Much of the dollar business is conducted through European and UK banks, leaving them acutely vulnerable to a dollar squeeze. Such episodes can be ferocious. It was a dollar liquidity shock that turned the Lehman affair into a global banking crisis, instantly engulfing Europe in October 2008.

      Emerging markets went into a tailspin last year at the first suggestion of Fed bond tapering. There was a sudden stop in capital flows. The "Fragile Five" (India, Indonesia, South Africa, Brazil and Turkey) were punished for current account deficits. The Fed backed down. The storm passed.

      There was a second "taper tantrum" earlier this year as the Fed finally began to pair back its $85bn monthly purchases under QE3. This too settled down. Those like India and Mexico that took advantage of the calm last Autumn to boost their defences were largely unscathed. Mrs Yellen has since recruited Bank of Israel veteran Stanley Fischer to be her number two, partly to navigate the reefs of emerging markets.

      However, that is not the end of story. A study by the International Monetary Fund concluded that the Fed's QE had pushed $470bn into emerging markets that would not otherwise have gone there. IMF officials say nobody knows how much of this hot money will come out again, or how fast.

      The BIS in turn said in its annual report two weeks ago that...(cont.)

      Anyne who believes with absolute certainty that the USD is going to suddenly collapse needs to objectively consider the above article and scenarios that are laid out in it.

      Denial that any of the above is impossible is basically the same mentality that said there's no way gold or silver would plunge this deeply from where they're price was once perched.

    2. And for the record....I don't naively believe all the official US Labor numbers are correct or accurately reflecting the new job market reality in the US.

      However, a centrally planned market (and it's algo trading programs) make no distinction whether those jobs are part time or full time.....they're jobs, period.
      The metrics and data the market/algo's uses (even if skewed and suspicious on some level) are what matter to the algo's.

      Our beliefs or opinions about the validity or integrity of the data matters not.
      The algo's have no conscience and they don't recognize the distinctions that humans feel about the data.

      The markets and USD will respond to the taper and the inevitable rise in rates.
      Other countries, such as the BRICS for example, will be hard pressed to follow suit and raise rates.

      Think about it.

  7. Well...whooda thunk. The DOW has "shrugged off" mid-east war and bodies falling from the sky.
    Good thing the Fed isn't in there buying equities or we might have a market that doesn't reflect reality...which we don't of course.


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