It does seem to be a pattern of late does it not? The Dollar keeps knocking on the door of overhead chart resistance while the Euro keeps knocking on the door leading to the cellar of downside chart support. Neither one has been able to mount a clear breakout either above or below their respective chart resistance or support levels.
In looking over the charts one has to stay with the technical indicators and go with those as far as favoring the odds for the next move. It appears that the Dollar is basing for a move higher while the Euro is basing for a move lower.
I say that because of the reading that the RSI is currently giving. Here are the charts with the first one being that of the Euro:
Note the consolidation or coiling type of pattern within the lines noted on the chart. The currency is hovering just above the 1.3350 level. Selling is coming in near 1.34 and above while buyers are evident from 1.3350 on down. Neither side currently has a distinct advantage.
However, the RSI has been tracking between near the 60 level and just above the 20 level for nearly three months now. That this indicator has been unable to get above 65 tells me that this market is weak. One would have to therefore go with the notion that the next move will be for the Euro to breakdown and test support at 1.3300. Below that is 1.3250. Personally I believe that the European monetary authorities, ( and exporters for that matter ) will not mind seeing this happen. If the market were able to clear 1.3450, we will have to revisit this thinking.
Here is the Dollar chart:
Almost the mirror opposite of the Euro is it not? Note how it is stuck just below the 81.80 level but is grinding slightly higher above the 81.40 level. The RSI has been tracking between 80 and 40 indicating a market that has internal strength.
Again, if one bases their analysis solely off of the charts, the next move in the Dollar should be higher but that means we will need to see a breach of 81.80 that is convincing from a technical analysis perspective.
Should both of these markets move accordingly, I would suspect gold will see move selling pressure. Again, geopolitical events are supporting gold ( as well as confounding currency traders ) but if that support does fade for any reason, a stronger Dollar will tend to favor weaker gold prices.
Let's see what Mr. Market gives us next.
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