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Posted by on Nov 14, 2016 in Market Insight

A Wave Of Dollar Strength

November 14, 2016

Dennis Gartman is editor and publisher of The Gartman Letter, and strategic advisor of the AdvisorShares Gartman Currency Hedged Gold ETFs (GEUR & GYEN). He regularly contributes to AlphaBaskets and lends his institutional insight to educate advisors and investors about commodities and the forex markets, including about trading gold in different currency terms.

The US dollar is strong across the board but most important, from our perspective, is the weakness in the EUR vs. the US dollar, for over the course of the past few days we’ve seen 1.1000 taken out to the downside; we’ve seen 1.0900 and 1.0800 taken out and now the “handle” is 1.07, we note the EUR is only barely trading into the 1.07 level as we write, having fallen at its worst to 1.0740 or so. Nonetheless, the EUR is weak; capital is leaving Europe and seeking refuge elsewhere and there is nothing “technically” to stem the bearish tide at this point, as made evident by the chart at the lower left this page… the “lead” position as we have said over the years.

We have included this chart (courtesy of Finviz) several times over the course of the past years… perhaps a dozen times but up-dated each time of course… to the extent that a number of readers/subscribers suggest that we’d included it more than enough. We disagree. The “small” Head & Shoulders top formed between April and June, subsumed by the much larger Head & Shoulders top that evolved from early March through September, argued for a materially weaker EUR and we followed that argument. Now, the trend line extending back into the first days of this year has been definitively broken; support has been taken out and rallies are clearly still to be sold.

The last vestigial remnants of support for the EUR vs. the dollar are at the 10550-1.0600 level, but that support too shall be taken out eventually. Oh, we’ll have a rally or so in the course of the next week or two, but that rally should be sold into. For now, we are adequately short and we watch as the “centre seems unable to hold,” as W.B. Yeats warned us would happen.

Moving on, the EUR/CHF cross continues to move in the favour of the Swiss franc, trading 1.0698 as we write and far below the supposed level of antagonism toward a rising Franc that the Swiss national Bank was so set upon effecting. The SNB’s officials had said two weeks ago and early last week that they were prepared to do what is necessary to keep the Franc from rising relative to the EUR, but thus far they have been absent from intervention efforts, or if they have intervened it is of such limited sums as to be utterly meritless.

We take this weakness of the EUR as a sign that money is absolutely intent upon leaving the “Continent” and finding safer harbors elsewhere and is doing so in such size that the SNB has deemed it irresponsible to “fade” those outflows. This does not and cannot bode well for the EUR.

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