The Euro, Time to Move to the Other Side of the Boat or Sinking Ship

There is lots of chatter about the demise of the Euro. It is the most talked about issue effecting the global markets. It is also a very crowded trade shorting the Euro. Maybe the most crowded trade in years. When this happens there are often a group of smart traders that start to take the other side. The analogy used is if everyone is leaning on one side of the boat it is time to move to the other side. Quite often this is the right trade and a difficult one to make. But sometimes, not always, but once in a while, everyone leaning in the same direction ends up sinking the ship. And isn’t that the goal? There may be a short term consolidation or reversal, but looking at the charts for the Currency Shares Euro Trust, $FXE, it is not time to leave the rail. Let’s take a look.

Currency Shares Euro Trust, $FXE, Daily

The daily chart below shows a clear downward channel with all of the Simple Moving Averages (SMA) sloping lower. The Relative Strength Index (RSI) is bouncing along the 30 level in bearish territory and the Moving Average Convergence Divergence (MACD) indicator is directionless but slightly negative. But there is talk of a bounce. This is a logical place for it as the Measured Move equating to the run lower from 145 to 131 leads to a target on this leg down at 127, right where it is. But if you step back and look at the broader picture the weekly chart, below, shows more

Currency Shares Euro Trust, $FXE, Weekly

damage to be done.There is support at the 125 level and there is the Lower Median Line of the Andrew’s Pitchfork attracting it below near 122.50. The RSI on this timeframe is also quite bearish and the MACD is negative, supporting more downside. But wait it gets worse. Backing out to the monthly chart shows that the downward move is still strong. The RSI is only back to the low 40s on the way lower after stopping right at 60. The MACD is trending lower and growing more negative as well. But the price action shows it in the third move lower after a move from 157.50 to 125 (32.50)

Currency Shares Euro Trust, $FXE, Monthly

and from 150.5 to 120.5 (30) with a target of 117.5 to 115 on a Measured Move. This is not a guarantee that it will continue lower but if you step back from the crowded edge of the boat because you are starting to get wet and crushed from the others, you might see as you peer through the periscope that there is a rogue wave on the horizon that could sink the ship.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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