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Euro Strength versus Dollar Weakness?

Tuesday, April 03, 2007 | 11:30 AM

in Currency | Economy | Technical Analysis

A few weeks ago at the Nasdaq, I bumped into Dennis Gartman. I was there for a spot at RobTV (Canada's version of CNBC), and he was taping a segment for CNBC's Fast Money.

We got to chatting, and quickly discovered we were sympatico -- about the economy, markets, and our expectations of future weakness for the US Dollar.

Below is his chart (reproduced with his permission) of the Euro versus the Dollar. The technicians amongst you might recognize the Head and Shoulders bottom formation.

As the chart below shows, that 1.3354 line represents a major breakout in the Euro versus the dollar. For those of you who are not technicians, recognized that that this pattern is one of the most reliable in all of technical analysis. That's not a guarantee, as all chart reading is best understood in terms of probabilities. This pattern merely makes it a higher probability outcome.

Here is what Dennis wrote on the subject:

THE EUR v. THE US DOLLAR: Might This Not Be The Largest Head & Shoulder Bottom In Modern Trading History... And What If It Is?"

Back in '95, before it was "officially" the EUR, the "Buchgeld" EUR traded to 1.3400-1.3450 and then made its top. Then, long after its official introduction as "Bargeld" currency in '01, the EUR made another top at this same level in '04 before finding strong selling pressure. We are there again, rapping on the door of this multiple top, and in the process over the past twelve or thirteen years have traced out a huge "Head & Shoulders" Bottom on the chart, suggesting strongly that a push upward through 1.3400-1.3500 would be of historical technical importance.