Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Up 8 Out of First 9 months - 13th Dec 24
What Does a Strong Sept Mean for the Stock Market? - 13th Dec 24
Is Trump the Most Pro-Stock Market President Ever? - 13th Dec 24
Interest Rates, Unemployment and the SPX - 13th Dec 24
Fed Balance Sheet Continues To Decline - 13th Dec 24
Trump Stocks and Crypto Mania 2025 Incoming as Bitcoin Breaks Above $100k - 8th Dec 24
Gold Price Multiple Confirmations - Are You Ready? - 8th Dec 24
Gold Price Monster Upleg Lives - 8th Dec 24
Stock & Crypto Markets Going into December 2024 - 2nd Dec 24
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold and the Contra-Trend Moves Seen in U.S. Dollar Euro

Commodities / Gold and Silver 2011 May 13, 2011 - 01:29 PM GMT

By: Przemyslaw_Radomski

Commodities

Best Financial Markets Analysis ArticleWe took a look at the Premium Update from this time last year and we saw that the more things change the more they remain the same. This time last year we wrote about the Greek crises and it seems that the European Union’s strategy of playing for time and hoping that Mr. Ed  will learn to speak Greek has not helped the situation much.


It was just a year ago that Europe bailed out Greece. A year later Germany is looking good with growth accelerating and unemployment lower than at any time since German unification. The European Central Bank is even raising interest rates to curb inflation. Things are more or less level in France and Italy, each of which recorded G.D.P. growth of 1.5 percent in 2010, well below Germany’s 4.0 percent. But Greece is still a mess with an economy that shrank 6.6 percent, far more than the 1.9 percent decline in 2009. Greece has not managed to restore its creditworthiness and Greeks have not embraced the idea that they need to grit their collective teeth and suffer the austerity cuts for a better future. The cost of borrowing has risen and Greece’s chances of renewed access to private lending on terms that the country can afford are not promising.
 
Recent anti-austerity strike in Greece and Standard & Poor's new warning about Portuguese banks exacerbated the euro-zone sovereign debt worries, sending the euro below $1.43 against the dollar and down more than 1% against sterling. Thousands Greek protesters took to the streets of Athens to demonstrate against the government's austerity measures, which were mandated by the European Union/International Monetary Fund bailout of Greek sovereign debt.

Like we said… things haven’t changed much. Last year at this time we wrote:

‘The Greeks themselves are not exactly embracing the bailout, as evident by Greek demonstrations which turned deadly this week when three people were killed after protesters set fire to a bank in central Athens. It’s hard to rescue a country that doesn’t seem to want to be rescued.’

This year’s May turmoil comes as fears grow that Greece could default on its debt next year without more help. The euro's drop, just a week after it hit a 17-month high versus the dollar above $1.49, accelerated after steep losses in stocks and commodities led to a stampede for the safe-haven dollar. (We can never truly understand investors who think that the dollar is a better safe haven than gold.)  Speculation over whether Greece will receive more bailout funding kept risk appetite volatile with investors pricing in the possibility that the Hellenic Republic will eventually need to restructure its debt.

We believe that postponing the inevitable will not help the Greeks, but only make the debt restructuring hurt more when it finally does come. Greek debt is expected to exceed 160 percent of gross domestic product and could easily go higher. As of now, markets are refusing to touch Greek debt – the latest indication is the recent S&P downgrade.

With so much happening in the markets let’s turn to the technical part with analysis of the Euro Index. We will start with the long-term chart (charts courtesy by http://stockcharts.com.)

In the long-term Euro Index chart, we have seen some declines. Although it could be argued that the euro has moved below the declining support line, this is truly quite insignificant and barely visible in the chart. We view this as a correction within the rally and not as a decline – at least not yet. There does not appear to have been any real change in the trend - only a temporary contra-trend move.

In short-term USD Index chart, we see the usual reflection of what has happened in the Euro Index. The highs of November 2010 seen in the Euro Index correspond to lows here in the USD Index.

The 50-day moving average is also in play here - we can see that it has provided support and resistance for the USD Index level on several occasions in the past and may very well do so again. At the moment of writing these words, USD Index has in fact moved slightly higher, but it’s below 76 and points made above remain up-to-date.

Before summarizing, let’s take a look at the general seasonal tendencies in the USD Index.

Please note that the end of May on average marks the end of the decline – we are close to this point, but not yet at it, so further declines or a  re-test of the previous bottom is quite likely. (In case you’ve been wondering, yes, the chart above is actually a screenshot taken from our new soon-to-be-released version of the website. In short – this is not an ordinary seasonal chart that you might have seen on the Internet. It’s much more in-depth as it takes into account derivatives’ expirations’ influence on the prices of a given asset - and actually our website is the only place that provides these charts.)

Summing up, even though it may appear that support and resistance lines have been broken in the currency markets, such is not the case. The USD Index did rally slightly but is tied to the Euro Index which has not invalidated its previous breakout. The key factor here is that the very long-term Euro Index chart is still bullish and it follows that the sentiment for the USD Index is therefore bearish.  

Since gold is positively correlated with the euro, a short-term rally in the yellow metal is quite possible (this takes into account the intraday decline seen on Friday). This would be very much in tune with the seasonal tendencies present on the dollar market.

To make sure that you are notified once the new features are implemented, and get immediate access to my free thoughts on the market, including information not available publicly, we urge you to sign up for our free e-mail list. Gold & Silver Investors should definitely join us today and additionally get free, 7-day access to the Premium Sections on our website, including valuable tools and unique charts. It's free and you may unsubscribe at any time.

Thank you for reading. Have a great and profitable week!

P. Radomski
Editor
Sunshine Profits

    Interested in increasing your profits in the PM sector? Want to know which stocks to buy? Would you like to improve your risk/reward ratio?

    Sunshine Profits provides professional support for precious metals Investors and Traders.

    Apart from weekly Premium Updates and quick Market Alerts, members of the Sunshine Profits’ Premium Service gain access to Charts, Tools and Key Principles sections. Click the following link to find out how many benefits this means to you. Naturally, you may browse the sample version and easily sing-up for a free trial to see if the Premium Service meets your expectations.

    All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments.

    By reading Mr. Radomski's essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Przemyslaw Radomski Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in