Friday, February 1, 2008

Charts of the Euro ETF, the USDX, and Gold

For this week, gold reached new all time highs yet again. Gold seems to be getting a little frothy again, and a pull back may come next week. That being said, the trend is still clearly up, so I would not bet money against this market.

Gold could potentially run into trouble if the US Dollar Index is able to find support. The USDX is in the 75 zone, which was support last time around. If there is a bounce, I expect it to be a feeble one. I have a hard time believing that the USD will be able to penetrate back through the prior support area of 80:

The next chart is a daily chart of an ETF that follows the Euro/USD currency cross. As you can see, this ETF is at what potentially could be a triple top. If the Euro fails at the red line, I would expect it to retreat to the green line. Once the Euro eventually gets past this resistance area, it would likely signal a new wave higher.

John Murphy recently said that he thought a bullish cup and handle formation was forming in the above chart. Although that is possible, and I have set my stops accordingly, I still doubt that the Euro will break above resistance this time around.

You'll probably have to refer to this article to make heads or tails of the above chart. Essentially, it is indicating that caution should be taken in the precious metal markets right now. I would not be chasing gold higher at this time.

Any pull backs represent long term buying opportunities, since the long-term trend is up. This post was written on Friday morning, but released on the weekend.


GI said...

Like your chart of the FXE. Looks to me like a triangle has formed. Another dip down to around 147 before breakout to the upside would be expected although exits from triangles often involve head fakes so wouldn't rule one out here.

Danny Merkel said...

Hi GI,

Thanks for the comment. Your intrepretation certainly is a valid possibility.

Predicting the direction of breakouts is difficult, but I still think that the Euro will not bust through the resistance area for a couple of weeks.