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Saturday, May 7, 2011

Trend for 7th of May 2011


Eur/usd finished the week on a very bearish tone. It is approaching pretty serious level 1.4285. This was previous resistance. Now, according to classical technical analysis rules, the level should act as support. As fundamental factors are the driving force in all financial markets we cannot just believe that the price will stop at 1.4285 level and eur/usd will start going up again. 

I will be watching this level very closely for any signs of reversal. If that does not happen Euro will be in serious trouble. I am convinced that dollar is a very flawed currency, but Euro zone is experiencing very serious problems and I don’t think that it is going to solve them any time soon. In fact, I think that quite a few European countries can go bankrupt in a matter of a year or two. In my opinion, some of them are already bankrupt, they just don’t admit that. 

If an economy is not able to sustain itself and government is forced to go to IMF for a loan, the country is in serious trouble and if it will not use the money to deal with the causes of the problem, but will simply use for social payouts or paying salaries in a public sector, money will be wasted pretty soon and the country will have to borrow again to compensate its’ inability to solve economic problems. 

So, watch what happens next week when markets open. I can also repeat myself that I trust in the strength of silver and other commodities as well as commodity currencies: Australian dollar, Canadian dollar and New Zealand dollar. These, together with some Scandinavian currencies should be among the strongest when chaos in global economy starts. And I think that stocks and bonds will be the securities to avoid investing to. 

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Oil, silver and other commodities