Look For EUR/USD To Fall Against Precious Metals

Silver has spent an impressive amount of time hanging above the $34.00 mark since the start of the week, in the face of “risk off” headwinds that have hurt the CRB Commodity Index as a whole. But silver succumbed to bearish pressure this morning -- falling below $34, on negative sentiment about the latest Greek deal and the fiscal cliff talks in Washington.

Gold has also fallen further back from the highs it reached at the end of last week. The euro rose yesterday to $1.30 following confirmation that Athens would be receiving a $44.6bn loan instalment, but traders are now concerning themselves with whether or not later this week the Bundestag will ratify a deal that may mean German losses on bailout loans.

'Tied To A Corpse'
Chancellor Angela Merkel is under pressure from the German public to take a hard line on Greece. The country’s media is accusing the government of deceiving taxpayers on the true cost of bailouts; one Handelsblatt contributor described Germany as being, tied to a corpse, while some polls show as much as two-thirds of the German public view joining the euro was a mistake.

Given that the EUR/USD seems to drop whenever German doubts come to the forefront of media attention (somewhat counter-intuitively, as it’s these Germans who are opposed to super-loose European Central Bank policy), there will probably be plenty more euro jitters between now and the election -- it not in Merkel’s interest to appear too forgiving on this issue.

FX Outlook
This would lend more support to the U.S. dollar in the currency markets, though some might liken such support to two drunks leaning against one another. What’s more or less certain is that the euro and the dollar will both continue to lose value relative to gold, silver, platinum and palladium over the next year and beyond.