Initial Signs of Strength for Euro

Although this morning’s up-spike in EUR/USD from 1.2465 to 1.2570 seems to be flying under the radar, my sense from my chart work is that it could be the initial signal of strength in a surprisingly powerful recovery rally period that propels the currency above its major down trend line from May 2011, now at 1.2830, towards the 1.3400-1.3600 target zone.

I don't know what the exact catalyst will be, but a combination of anticipated QE, ECB bond buying, and short covering could make for a period of violent upside for the Euro (downside for the USD) near-term.

Such a scenario should prove very supportive for spot gold and the SPDR Gold Shares (GLD). In theory, spot gold should accelerate towards $1790 - $1800 very quickly.