EURUSD Breaks out as Gold/EUR Breaks Down

As EURUSD hits 1.3230s, we reiterate the importance of Gold's measure on FX signals. We showed in Friday's note how Gold in euro terms was testing below its 55-WMA for the first time since Dec 2008. It has now broken well below both its 200DMA & 55-WMA. It’s essential to assess various currencies against a common (non-FX) denominator such as metals to evaluate each currency’s secular performance. XAUUSD (Gold in USD) remains well ABOVE its 55, 100 and 200 week-moving averages (strengthening gold, weakening USD), while XAUEUR (Gold in EUR) is already at 5 mth LOWS (weak gold, stronger EUR). Such relative performance between EUR & USD with respect to gold argues the case for further EURUSD upside. This summer’s EUR flight to GOLD safety is in the process of continues to be unwound. And unlike the ECB, Fed has a 6.5% unemployment target that’s predominantly USD-negative. Additional (inevitable) releases of “favourable Fiscal Cliff talks” is the next shoe to drop from the risk-aversion trade. NEW TRADES from the PREMIUM INSIGHTS will follow later this evening.