As you can plainly see, some commodity bulls are back-peddling this year. We know from our hedge fund experience that the falling US dollar played a big part in rising commodity prices.
Which isn’t to say that real commodity demand doesn’t mean anything. But if you plan to have anything to do with cheap resource stocks, you need to consider the US dollar’s direction. Today we’ll do it for you. Here’s the Euro/Dollar Chart.
Currencies can get confusing. So just remember what this chart shows: how many US dollars you can buy with one Euro. Not the other way around. When the price here rises, it’s the Euro rising. Not the dollar.
The key point fundamentally is the future interest rate differential between the US and Europe. At the moment traders are leaning towards rising US rates and falling European rates. That, more than likely, will mean a short term uptrend in the US dollar. That would mean a falling Euro.
You can see that the chart agrees, reader.
The MACD is clearly bearish. The technical Momentum indicator has also crossed below its signal line at 100. The bearish momentum is building up. There’s a long way to go before you can call the Euro oversold.
The next support for the currency pair is 1.53. It’s been tested several times in the past few months (points A, B and C on the chart). But personally, we’ve got our binoculars firmly trained on 1.50. It was a famous previous high (points D, E and F).
