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Euro Pain, Dollar Gain, Gold Disdain

03/04/04 01:41:26 PM
by Gary Grosschadl

Things heat up in this ever-present love triangle.

Security:   $EUX / $USD / $GOLD
Position:   N/A

There is no denying the strong intermarket relationship here. The American dollar and the Euro wrestle each other for supremacy. What drives one up, drives the other down as currency traders are swift to play one against the other. Meanwhile gold, since it usually moves opposite to the USD (U.S. Dollar Index), also usually moves in tandem to the Euro via the XEU (Euro Index). Gold followers would do well to watch the XEU as well as the USD.

The mirror image relationship is so strong between these duelling "dollars," that we see equal and opposite pattern measurement targets each containing confluent support/resistance from their respective 200-day exponential moving averages.

Strong intermarket relationships are very apparent on these three charts.
Graphic provided by:
The daily gold chart shows a symmetrical triangle which is generally a neutral pattern, that can break either way. With extra pressure on the Euro, this gold triangle could break the lower trendline. If so there is a suggested support zone via a strategic former long candlestick shadow as well as a previous gap. Not surprisingly there is confluent support from our old friend the 200-day EMA.

Gold traders should watch for a turnaround signal from the Euro Index which should also relate to a USD reversal. These moves may coincide with a move back up to the gold chart's upper trendline.

Gary Grosschadl

Independent Canadian equities trader and technical analyst based in Peterborough
Ontario, Canada.

E-mail address:

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