Euro Holds Gains From Breakout, Oil Firms

By Tom Luongo in Currency Articles, Gold and Oil News | January 14, 2013 23:08 |

The Euro completed an important week of trading last week with a close above the important $1.33 level, which, after the ECB policy meeting and successful Spanish and Italian bond auctions, confirms a significant breakout setting up a continued bull market through at least Q1 of 2013.  You can check out more details here. The important thing to remember is that if the Euro ends this month over $1.33 then that is a strong signal of real U.S. Dollar weakness for the year.  This is what the Federal Reserve wants, ultimately, it just doesn’t want it to happen in such a way that they lose control over it.

With Monday a zero big news day other than Bernanke’s introduction to Twitter, the markets were relatively placid (outside of a spurious Dell announcement).  Brent crude looked to have put in a short-term bottom before reversing after the COMEX closed to pop back over $111 per barrel.  With options expiration this week there is a good chance that there will be no confirmatory breakout signals in those things highly correlated with rising inflation expectations: gold, silver and oil.  Silver jumped back over $31 but will need to hold above $31.20 through the end of the week for it to be significant, otherwise it is just churn.

Gold as well, needs a weekly close above last week’s high of $1678.15 to take on a short-term bullish posture.  With the GLD option pain number at $162 and GLD closing today at $161.54 I’m not optimistic.

About Tom Luongo
Tom is a professional chemist and self-taught economist who has been following and trading stocks for nearly 12 years. He has no formal ties to the financial industry and considers that an asset in his analysis of the interplay between monetary policy and capital markets.

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