Euro’s rally doesn’t translate to economic improvements
After a steady 13% run up since mid July, it appears as if the euro’s very impressive rally might be in jeopardy. While European bourses have also enjoyed a recent rally, the financial euphoria does not appear to have translated to actual improvements in the real economy. Spain and Greece both reported record 26% unemployment in January while Italy remained right near record highs at 11.1%. With the release of the Spanish unemployment figure, Iberian bonds sold off and yields popped higher on the day. This also coincided with protests in Madrid over allegations that senior politicians, including the Prime Minister, received illegal cash payments from offshore funds. In France, Volkswagen and US carmakers led a 15% drop in French registrations, the lowest level in January in 15 years. This is likely a harbinger for the broader region and as LME inventories rise, it suggests a decrease in overall industrial demand. This all bodes bearish for the euro and after failing at 1.37, it would not be a surprise to see the currency retreat lower. Gold is consolidating and is trading between $1,660 and $1,693. The $1,693 figure is the fourth point on a down trendline stemming from the high made in early October of last year. Silver has struggled to break through resistance as well and is finding decent size offers waiting for it just over $32. Should silver actually decisively break this area, its next target would be the 100 day moving average at $32.33.
