In this post I'm just going to go over quickly a monthly chart of the Euro Index. This chart should help you understand the big picture for the currency, and how it will affect other markets. I believe that the long term implications of the following chart are quite bullish, and I will explain why.
In the chart below, each candle represents an entire month of price action. This chart goes back about 12 years.
The main thing I wanted to point out, and I'm sure you can see it already, is the enormous inverted head and shoulders pattern that has formed. This is obviously a very bullish development, and, if the pattern is completed, it could have implications for the Euro, and indeed Gold for many years to come.
The second thing I noticed about this chart is the double top that formed. The Euro hit its old 1995 high as marked by the second blue arrow, and stalled out. At the exact same time, Gold Stocks, as represented by the XAU, topped out, and experienced weakness for the first half of 2005. For those who do not believe in intermarket analysis, this would just have to be another coincidence.
One other note of interest, and this is for candle chartists, is the shooting star candle formation that occured in October, 1998. This candle, which is related to the gravestone doji, is one of the most ominous formations, in my opinion.
The final aspect about this chart I'd like to show you is the MACD Histogram. This indicator, when used on monthly charts, tends to be very reliable, with very few false signals given. I view it is a giant pendulum slowly swinging back and forth, from bull to bear market. As you can see we have swung into bull market territory.
That's all for the Euro analysis, but before I go, I'd like to say that I would like to hear your thoughts and constructive criticism about this site. So, the first 5 people who send me an email, or write a comment, will receive a free technical analysis ebook via email. This ebook is one that I have read, and you will be able to read it on your computer in its entirety. Thanks again for stopping by.