The EUR has continued to weaken on the forex markets with the psychologically important 1.1000 level having been put to test and for the moment having held. It won’t. 1.1000 will be “given” just as 1.1300 was, and just as 1.1200 and 1.1100 were also “given” late last week following the ECB’s very dovish comments on Thursday. It is clear to us that the monetary authorities there in Europe are prepared for and are intent upon weakening the EUR in order to spur export trade firstly and to engender an inflation of at least 2% secondly.
We draw attention then to the chart of the EUR in very broad monthly terms which very strongly suggests that the “consolidation” pattern that has evolved over the course of the past nearly ten months is precisely that: a consolidation of the swift, violent and material bearish run from 1.4000 to 1.0500 that took up most of last year. If the present weakness devolves into a panic EUR selling… and we think that it may and indeed can… then we shall see 1.0500 given and then “par” and then perhaps even .9500 over the course of the next few weeks and months, as egregious as that may sound at the moment.
The gold market has gone from being over-bought to neutral and has done so swiftly and readily. We suspect that Thursday’s and Friday’s action shall convinced those who are or have been skeptical of the benefits of owning gold “funded” in EUR or Yen terms the error of their ways, for gold in dollar terms waned while gold/EUR and Gold/Yen rose… not dramatically, but pleasantly.
Dennis Gartman has been directly involved in the capital markets since 1974 and has been publishing his daily commentary, The Gartman Letter, since 1987. Mr. Gartman is a strategic partner with the AdvisorShares Gartman Currency Hedged Gold ETFs (GEUR & GYEN) and lends his institutional insight to educate advisors and investors about trading gold in different currency terms.