Advertise | Bookmark | Contact Us | E-Mail List |  | Update Page | UraniumSeek.com 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

Gold Seeker Closing Report: Gold and Silver Gain About 1%
By: Chris Mullen, Gold Seeker Report

Northern Vertex Files Preliminary Economic Assessment Report for the Moss Gold Mine in NW Arizona
By: Northern Vertex Mining Corp.

Does The CoT Structure Prohibit A Rally?
By: Craig Hemke

Harry Dentís Gold Prediction Invalidated
By: Przemyslaw Radomski, CFA

SELLING OUT OF PRECIOUS METALS AND BUYING BITCOINÖ. Very Bad Idea
By: Steve St. Angelo

The Bitcoin Bubble Explained in 4 Charts
By: Jake Weber

VXX Sends an Awesome Message from Another Galaxy
By: Rick Ackerman

Geopolitical Risk Highest ďIn Four DecadesĒ Ė Gold Demand in Germany and Globally to Remain Robust
By: GoldCore

Asian Metals Market Update: November-22-2017
By: Chintan Karnani, Insignia Consultants

Gold Seeker Closing Report: Gold and Silver Gain With Stocks
By: Chris Mullen, Gold Seeker Report

 
Search

GoldSeek Web

 
The Million DOLLAR QuestionÖ


 -- Published: Thursday, 17 July 2014 | Print  | Disqus 

By Rambus

Tonight I would like to take a look at the US dollar as its been showing a little strength lately. Over the last month or two Iíve been showing some commodities indexes that have been very weak which I think has to do with the strengthening US dollar. The move up in the US dollar hasnít been that big yet but it could be in the beginning stages of a rally phase that could send this index higher. How high is anyoneís guess but any strength will have an impact on the commodities sector and possibly the precious metals complex. It has been awhile since we looked at the US dollar so lets take a look under the hood and see what we can make of the reserve currency.

The first chart I would like to show you is a long term daily chart we were watching very closely back in May of this year. At the time it looked like the US dollar was building out a massive H&S top formation. As you can see the neckline was broken to the downside but quickly reversed direction and rallied back up above the neckline. At the time I said that was probably a very bullish development. When you get a false breakout like that and the price action reverses quickly that is generally a sign of exhaustion. So far that has been the case.

us dollar H&S top

The daily dollar chart is really quite boring for the short term as there arenít any good chart patterns to be seen at this time. The longer term daily chart does show a big horizontal trading range going all the way back to November of 2013 which corresponds with a similar sideways trading range for gold. Itís not perfect but you can see the inverse movements between the US dollar and Gold. If you look at the last month of trading for both the US dollar and gold, on the combo chart below, itís very clear that they are moving in the opposite direction.

us dollar & Gold horizontal

This next chart for the US dollar Iíve been following for many years that shows a three year cycle low that comes in like clock work. Itís hard to believe that the next three year cycle low comes in on July 22 of this year. Please notice the three year cycle low in 2008 and 2011 which coincides pretty close to important tops in the PM sector and commodities. Are we going to experience the same thing again three years later from the 2011 cycle bottom? Also the US dollar is now trading above its 200 dma. Itís something Iím keeping a very close eye on.

us dollar 3 year bottoms

If weíre going to look at the US dollar we need to take a close look at the XEU as the euro is the biggest component in a basket of stocks for the dollar. Unlike the daily chart for the US dollar, that doesnít have a decent short term daily pattern in play, the euro does. Today it looks like the euro broke out of a H&S top with a small gap. This could be an important top that has just formed as Iíll show you in a bit as to why.

xeu day h&s top

Below is a very long term chart for the euro that shows two bearish rising wedges, one inside the other. Notice the last bar on this chart. Itís the same small gap that accompanied our little H&S top on the chart above. Now you can see why this is such a big deal. If the euro starts to drop precipitously it will have a positive affect on the US dollar which will have a negative impact on the commodities complex.

xeu risingwedges

This next chart Iíve overlaid the euro on top of gold so you can see the similar correlation. Again itís not perfect by any means but it does give you a sense that when the euro is strong or weak so is gold. You can do the same thing with the other important currencies and get a similar result. Again something Iím keeping a close eye one.

xeu over gold

This last chart is a very long term monthly look that shows you just how precarious the situation is with the euro. I showed you a bearish rising wedge earlier in this post for the euro that just broke the bottom trendline today with a gap. This is the same bearish rising wedge only on the monthly look. You canĒt see the gap on this chart but the daily chart does show itís now breaking the bottom trendline. This could be a very big deal.

XEU LONG TERM RISINGWEDGE

Below is a very long term chart in which Iíve overlaid gold on top of the US dollar. This chart clearly shows you the inverse correlation over the long haul. It doesnít feel like it but the inverse correlation has been pretty good since the commodities complex topped out in 2011 along with the US dollar bottoming about the same time.

gold and us dollor overlaids

Below is the CCI commodities index weíve been following that has been showing weakness since the first of the year or so.

aa cci wee

CCI monthly look.

aa cci monthy

Lets take a quick look at copper as itís one of the more important commodities to help give us direction. As you can see it has been building out a massive triangle pattern that started to form way back in 2011 when the commodities complex topped out. As you can see itís testing the top rail which would be the 7th reversal point if it holds which would make this triangle a reversal pattern to the downside. On the other hand if it breaks out through the top rail that would be very bullish for the different economies of the world.

copper

The US dollar is at a critical juncture right here and now. Based on the XEU, which is just starting to break down, this would imply that the US dollar will show strength in the coming months. The weakness in the commodities complex has already shown up which is suggesting deflation is more pronounced than inflation at this moment. There are areas of strength in the commodities, such as the industrial metals, which have been doing pretty good, but other areas like the agricultural side of the commodities complex is doing very poorly. How will the precious metals complex fair is the million dollar question. Will they buck the trend and move to the beat of their own drummer? Looking back in hindsight we will know the answer to that question. Right now we have to be ever so vigilant looking for clues that may help us understand the answer to that million dollar question. All the bestÖRambus

http://rambus1.com/


| Digg This Article
 -- Published: Thursday, 17 July 2014 | E-Mail  | Print  | Source: GoldSeek.com

comments powered by Disqus



 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2017



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer

The views contained here may not represent the views of GoldSeek.com, its affiliates or advertisers. GoldSeek.com makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, is strictly prohibited. In no event shall GoldSeek.com or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.