Technically Speaking - Dollar - Gold

 

US Dollar - Time For a Real Rally?

There is plenty of speculation as to what Jean Claude Trichet will do with the Euro zone's interest rates. Depending on who you listen to the ECB may move rates up, down, or keep them steady. To his credit, Trichet keeps us guessing with statements that he is concerned about inflation and slowing growth.  Hypothetically - All it would take is a clear policy statement from JCT of staying steady - or for a shock a mention of dropping rates - and the US dollar will be able to roar back.

 

Pound Predictions?

Looking at the Weekly chart (above ckick to enlarge) for the Pound Sterling vs. US Dollar you can see that a Head and Shoulder pattern may be completing if price was to drop to the 1.9100 range. This would complete the right shoulder. If that happens - you will have a bounce or break off the supporting neck line. A Dollar Rally will be confirmed if this neck line is broken.

 

US Dollar Poking Holes in the Swiss Cheese?

The USD-CHF (above) is usually a good indicator of Dollar Direction. The chart above shows the 100 SMA has held as resistance quite well - but a solid break above that line - would have it also break above the current up trend channel. If that happens, it could signal a real Greenback rally against  the British Sterling and the Euro.

 

Meanwhile Back in the Darkened Gold Mines

 

Gold - Giving Traders the Shoulder - Heading Lower?

While Oil is posting lifetime record Highs, and the US Dollar shows a lack of direction, Gold is showing a chart pattern that might be bearish. The Daily chart of Street Tracks ETF GLD shows a Head and Shoulders Pattern with a broken neck line. The neck line coincides with the key 61.8% retracement level support level making this line quite significant if it is violated again. The 200 Period Daily SMA is currently at just about 81. GLD typically trades at 1/10th of the spot price.

 

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Comments

[R Lopez]

HI Jerry
With GLD, there seems to be also a support around 83.60 from NOV 07 and it was tested, at the same time the USD start loosing strength again, coincidence!. ALso the 50 MA that was a support, now is in a down trend after bouncing off it on APR 17 08, with some good distribution days on record. Could the new resistance be around 93 or 91 for gold in about 8 or 10 days?

[Jerry Furst]

R. Lopez - Your observations are very good - yes, there is solid support at the 83.60 range - and even more astute is your observation of resistance at the 91-93 range. If you go back to the post/chart of GLD above and enlarge the chart, you will see the 38.2 Fibonacci retracement was drawn just above 91!
Happy Trading.... J-1st

[Belly]

Hi there,

Come on Jerry, JCT would never higher the target rate, and neither is the market predicting any target rate hikes.
I guess you are not as good in BCE analysis as with the FED, but that's ok.

According to me JCT is just waiting for really bad Eurozone economic data to take a more dovish stance, in order to lower rates later in the year (meeting in June will be decisive, but will certainly be a statut-quo, analysing the speech in details will tell us when to price the real rate lowering). Inflation has already been above target for some months (and that's not good at all) but it is mainly rooted in the HICP which has nothing to do with rates hike but is more relying on food and energy boom.

Please keep in mind that the strenghtening of the EUR is equivalent to a rate Hike in terms of GDP loss. JCT has been heavily criticized for maintaing such a strong EUR and a further rate hike is not something he would do easily.
Therefore, it is time to consider a statut-quo and a lowering of the rates later in the year waiting for the bad data to show up (Oct Nov Dec?) like the BOE, just because when very bad economic data arrive, you can lower rates without producing so much inflation

Hope it helped you

Belly