Euro Breakdown & Bull-Trap Confirmed = Dollar UP, Gold/GDX Down

This EUR/USD bearish rising wedge breakdown + break of horizontal support is likely to bring the pair down to the 1.11ish target zone. Gray horizontal lines are minor support levels, any of which may produce a temporary reaction. Should the EUR/USD fall much below the bottom of my pullback target zone, the next likely stop would be the 1.098-1.10 area. This all but confirms the bull trap/false breakout scenario for the Euro discussed in yesterday's video.

Once again, my focus on the Euro & $USD is to help determine how far the expected pullback in gold & ultimately, GDX, will go. As of now, the charts seem to point to more upside in the Dollar which should translate into more downside for gold and GDX.

EUR-USD 60-minute 2 Feb 10th

EUR-USD 60-minute 2 Feb 10th

On a related note, this headline from the WSJ today meshes with these comments that I had posted in the trading room yesterday : Yellen Flags Risks to Economic Outlook That Could Delay Rate Increases

My comments from yesterday: I try not to read too much into a signal day’s price action on any security but it is worth mentioning the fact that the US Dollar is trading down very sharply today, well below yesterday’s lows, yet gold & GDX have traded below their respective highs all day so far. In other words, gold & the miners are not reacting to the sharp drop in the dollar today.
If you recall from that Jan 29th video, I mentioned how the dollar was trading up very sharply that day on the news that the BOJ moved to a negative interest rate policy, yet gold & the miners were trading flat to up, as if the smart money was expecting the same imminent reversal in the dollar that I was favoring.
Maybe the same thing is happening in reverse now? Despite what appears to be a very bullish breakout of the bull flag continuation pattern on the EUR/USD pair (indicating more downside in the dollar in the coming days), this breakout may prove to be a false signal, which would cause a sharp & sudden reversal (bounce) in the dollar if so.
I mentioned in the video today that while the CB’s can’t directly manipulate stock prices, they CAN and often DO manipulate their own currencies. As such, what better time to for the Fed & other CB’s to step in & thwart today’s bull flag breakout & rip in the EUR/USD pair, as some of the most powerful moves in trading come immediately on the heels of failed breakouts (bull or bear traps).

To expand on those comments, such a move (central bank intervention to support the US Dollar) would (or should, in theory) accomplish two things: 1) Stop or slow this flight-to-safety into gold as a alternative to fiat currencies (NOT what the central banks want to see right now) and 2) The trend in recent years has been dollar up=stocks up, dollar down=stocks down. Should that trend continue, then supporting the dollar right now as the markets are suffering major technical damage would be a way to continue to post-pone the inevitable & keep the punch bowl full (or at least partially refill it) a little longer.

Feb 10, 2016 10:29am|Categories: Forex (Currencies), Gold & Commodities|Tags: , , , , , , |Comments Off on Euro Breakdown & Bull-Trap Confirmed = Dollar UP, Gold/GDX Down