Tuesday, May 11, 2010

Buy the Euro

Paolo just brought to my attention the latest over story of Newsweek's Atlantic edition dated May 17. The cover story was written by Niall Ferguson, a leading economic gloom-and-doomer.

The tenor of the article is well described by the cover caption "The End of the Euro" although Ferguson, like any good prognosticator, hedges his view. Nonetheless, I take this cover story as good reason for thinking that the drop in the Euro from its recent high near 1.50 is about to reverse. This magazine cover just reinforces the emotions which are reflected and amplified by the drumbeat of newspaper and website headlines about the financial crisis in Greece.

The monthly chart at the top of this post shows the Euro going back 15 years or so. I think the currency has been trading in long term boxes that are about 40 cents from top to bottom. The top box has its low near 1.21 My best guess is that after trading sideways to lower for the next month or so the Euro will rally at least half way back into its box. That would put it back at 1.40 or a bit higher.


  1. My parents back in Germany are engulfed in outright currency panic. I have not seen anything like this with them ever before. They think Weimar is coming back with complete currency destruction. It's paranoid there if you ask me. No better time than this for a strong trend change up in the Euro.

  2. The 'break-up of the Euro' (i.e. back to national currencies) meme is strengthening, with blog posts, forum posts, quoting of Volcker's recent speech, all taking off. Hard to pinpoint a turning time and point in the weak Euro trend, but it is not far off now.

  3. All I hear about all day is the collapse of the Euro. Betting against the Euro is the blatantly obvious and recently successful trade. It is also a very crowded trade. It appears to be a perfect set up according to your book, Carl. The tricky part for me is the timing.

  4. Dave,

    here is what Carl wrote today in his other blog

    "Euro-US Dollar: The market is starting to stabilize. The 131 level is resistance. Support is at 122. I think a move to 140 will begin from current levels."

    Effective position sizing and a sound stop loss policy are paramount in my humble opinion.

    I also believe Carl's view on the Euro is spot on.

  5. Hi Carl,

    Since the low (june 7) the Euro has rallied well, up by 10% now over 8 weeks in total now.

    In what "market context" would you put the Euro. Would it be a bear market, due to all the Soverign debt in EU Zone?

    If it is in a bear market context what Agressive mechanical method would you be looking at?


  6. Do you still see EURO as a buy?
    Check out this article.