"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

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Monday, August 18, 2014

Dollar Back up; Euro Back down

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.

9 comments:

  1. Full agreement Dan. The three ($, euro & gold) are feeding one another with a risk premium for gold and nothing else. Amazing how week the commodities have been including oil.

    ReplyDelete
  2. it's 50-day MA tests day with the dow (INDU) and the small caps (RUT) both coming into the 50-day at their highs, and gold (GLD) has gone below the 50-day. the NDX is now into prices not seen since 2000, giddy bulls now talking the end of the divergence that hasn't seen the NDX at all time highs a la the other indexes this year.

    for the ags there is alot of rain in the midwest forecast for the next week. if the rain gets the soybean dry areas it will be hard to keep nov beans up at today's price. soybean basis is very strong even ballistic in areas as somebody wants old crop beans still. profarmer tour was today and the next 3 days, said to see some dry beans today that helped price recover.

    mcclellan says ags get strong end of this year, based on how gold did the year before!
    http://www.mcoscillator.com/learning_center/weekly_chart/grains_down_beef_up/

    cheers!

    ReplyDelete
    Replies
    1. Thanks 77. Interesting article on the ag cycle and relationship between grain and livestock prices in particular.

      Delete
  3. http://stocktwits.com/message/25862145
    http://finviz.com/quote.ashx?t=gwph&ty=c&ta=1&p=d

    GWPH finishing Strong today. Get on board...

    Forget metals for a second.

    ReplyDelete
  4. Not one of the "acclaimed eggspurts" or 40-year veterans predicted:

    - the fastest, steepest selloff in the CRB Index since 2008 - 2009.

    - the immediate reversal in U.S. stocks after the brief selloff 2 weeks ago

    - gold going nowhere but flat

    - soaring U.S. Dollar and soaring Treasury bonds

    In summary the combined forecasting record for those guys as of late was an ABJECT FAILURE.

    HOWEVER....

    Our very own Dan Norcini expertly nailed the top in energy prices before the huge massacre, and saved by butt!!!

    Thank you Dan!

    ReplyDelete
  5. Jim Puplava for the 2nd week in a row explains how there is a huge difference between writing newsletters and managing money.

    Provides examples of how some new clients were decimated after listening to the gloom and doomers.

    http://www.financialsensenewshour.com/broadcast/fsn2014-0816-2.mp3

    Obviously his firm has been very successful, as he is now building a brand new house and purchased another sailboat.

    Meanwhile doomers and preppers like Jim Willie are still living in a mud hut in Costa Rica, LOL.....

    Guys like Egon Von Greyerz who are trying to short the market will probably be sucking food through a straw by year end if he doesn't wake up and adapt.

    ReplyDelete
  6. alright ive been wanting to sell my stocks and go sidelines or into gold for a while and for the first time in ages i am more on the sidelines finally, with very few nice swings at obvious bottom and curl levels,, all whilst the retracement of the beginning of the market correction seems complete...im just not sure how deflation will affect gold and the gold stocks, probably badly too, just not as bad as general stocks...i dont know, but im bias against the markets now....i just feel like SPY, QQQ , etc cannot keep going up with interest rates soon to rise, taper going to be complete and war in about 20% of the world. give me a break....huge correction coming and i reckon all the big boys are standing by for that signal and an avalanche of selling will act like a flash crash

    ReplyDelete
  7. When I am crowned Emperor of the Entire World *** my first move will be to introduce a new Tax on mindless bullsh*t, which will be used to fund the rehabilitation of families torn apart by ill-informed greed and speculative frenzy for precious metals (This will be supplemented by a 110% levy on advertising revenues generated by "Work From Home" banner ads)

    Here is an example of the kind of thing which will be taxed (in this case at the Rack Rate of $3 billion per consonant) - silver opened over here at around $19.55 yesterday, and closed higher, now standing at $19.62. So anyone who feels compelled to write that "Gold was under some pressure, with silver capped." will likely find this is an expensive hobby http://jessescrossroadscafe.blogspot.nl/2014/08/gold-daily-and-silver-weekly-charts_18.html

    You have been warned


    *** NB My coronation has apparently been postponed [again!!] until next week - this time due to difficulties with the diamante epaulettes on the uniform. Watch this space, friends (or, as you will be referred to from next Thursday onwards, "minions")

    ReplyDelete
  8. EUR USD has been capped mercilessly by its ema15 / ma20.
    Shorting on the ma20 level seems interesting.
    Support in blue is holding prices.
    If it fails...my next target would be the next red line.

    http://tinypic.com/view.php?pic=e8vitw&s=8#.U_LboPmSySo

    ReplyDelete

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