In a normal market, currencies typically follow the interest rates of their own country... but the currency market today is not normal... the dollar has been artificially depressed due to FED easing... but now, the easing will stop, so the dollar is now returning to its normal state of equilibrium among other currencies and already surpassing a 4 year high just two weeks ago... last week, it sold down to retest the break out level, and is now poised to continue higher... I think much higher... look at world commodity prices priced in dollars, they're declining due to the stronger dollar, and certainly Europe is happy to see the dollar rally since it would only help their economies which are now on the brink of a recession... frankly, I don't think Europe can stop a recession no matter how many dollars their central banks buy (if that's what they're doing), and it's going to add more fuel to the rally for the dollar into 2015...
Simply said, I think the dollar is probably the best buy on the board today...
Here's a weekly 5 year chart of the EUO, this is the ETF representing short Euro or long the dollar... notice how it broke out higher and only just now tested the break out level which is now acting as solid support... you can see the earlier bear trap breaking down from the wedge in late 2013 followed by a clearly defined saucer bottom beginning in mid 2014... a saucer bottom is a very strong bottoming pattern that is very likely to continue for an extended period of time... saucer bottoms don't typically fail... using a simple measured move, this chart pattern projects a move for the EUO up around 27.50 to 28.00 before a legitimate significant next top is in at some point in late 2015... I think this is also consistent with the fundamentals for this currency considering the FED's recent actions and the current European economic conditions... with the EUO closing this past Friday at 19.99, this market has plenty of upside room to go... this should also keep all commodity prices weak for a more extended period, this includes gold and the miners, as well... of course, I could always be wrong, but this is my story and I'm sticking to it...
GZ |
