US Dollar Breakout?

There is something developing in the currency markets. We had the Euro take out the 135 level on Friday and then bounce up near 13550 to start this week. Now on early Tuesday, the Euro has taken out the lower level of support of 13480 and is currently trading below 13470 for almost 12 straight hours without much of a bounce at all. Technically this would appear that this currency may be headed lower. Take a look at the daily chart below

Did the Euro take out this band of support because of the normal interest rate story where everyone is thinking the FED is going to raise rates and the ECB has got more work to do, I for one do not believe this is the case. It could be that Germany is considering toughening their stance with Russia and levying more sanctions, which in turn could be harmful in the long run to the European economies. This Ukrainian situation may indeed end up playing a bigger theme in all of the financial markets than what equities have been leading on the past few trading sessions.

Next I am going to talk about the US Dollar. As you can see on the chart below, the dollar is almost pushing up through resistance near the 81 handle. Please have a look

Last week and pretty much for this past year, I have been saying that I did not see any sustaining rallies in the US Dollar because I truly do not believe that we are going to raise interest rates any time in the immediate future, feeling that any rallies in the US currency would be selling opportunities! On the other hand I have mentioned and have been concerned that if the equity markets start to unravel the dollar could indeed rally. Yes the equities have rallied all the way back to the highs like the world is perfect but if it, and yes, that is a big IF, cannot rally through these highs soon in a big way, they just may roll over and go down quite a bit from here.

Sorry, no charts on the exciting US equity markets today, but I would like to leave you with a chart on crude oil. After last weeks spike up, oil is not looking so strong and by the looks of this chart, it may just be headed south of $100 again. Great for us, the consumer at the gas pump, but I do think it is a telling sign of the weak consumer as a whole and may be a precursor of where the equity markets are headed.

One last market to mention is that of GOLD. Not really much to say here other than it is trading at $1308 and until it can stay above $1330 for a couple of days, I am not interested in buying. Be on the lookout for $1280 on the downside if 1300 should not hold. Again, thanks for reading and if you are trading remember to be quick and nimble, it's not easy out there! Let's see what the next day brings.

TraderMartin