goldseek.com / By Przemyslaw Radomski / December 28, 2012
This week has brought in some calm after recent declines in the precious metals sector. Everybody seems to be waiting for some more decisive moves (both in the markets and on the part of the government, as the “fiscal cliff” issue has not been resolved yet), but these are not very likely before the beginning of the New Year.
Meanwhile, currency markets have been moving in the direction that makes precious metals investors happy – or should make them happy, were the situation “normal” – i.e. were the correlations between precious metals and the U.S. dollar strong and negative. Quite unfortunately, the situation is far from normal, but this is likely due to the abovementioned “fiscal cliff” problem and the uncertainty caused by the lack of final solution. Let us then move on to the technical part of today’s essay and see what we can figure out from the charts and correlations – we’ll start with the euro’s long-term chart (charts courtesy by http://stockcharts.com.)
Recall that two weeks ago, we had discussed that if the index closed above 132, the breakout would be confirmed and higher values likely. A small decline was seen last Friday, but the Euro Index is once again above the 132 level. If it closes the week in this trading range, the breakout above the September high will be confirmed and a further move to the upside likely. The 138 level appears to be within reach if this holds true. All-in-all, the Euro Index picture this week has bearish implications for the dollar.