- Posted by Greg Harmon
- on November 30th, 2016
Europe to an American is a hard place to understand. Each country is about the size of one of our states. They have sports fans that sing national songs and support their national team without any question about supporting another. Have you ever heard of someone living in Germany being a huge England fan for football? Not like all the Yankee fans outside of New York, that is for sure. Their television is bollocks too. Like it is stuck in the 1970’s Rowan and Martin’s Laugh-In mode, when it is not sports or news.
So it may come as no surprise to Americans that their currency, the Euro, is looking like trash as well. The long term chart below tells the story. After falling into a low in 2000 the Euro strengthened over the next 8 years, reaching a peak in 2008, just as the world economy was about to go into a freefall. It did drop with the world markets but found support around 120, and consolidated there, against a series of lower highs, for the next 6 years. This was about a 50% retracement of the 8 year run higher.
At that point it has built a descending triangle. It broke that triangle to the downside at the start of 2015. This established a target to about 80. That would be a full retracement of the move higher. But the Euro stalled in its move lower as it hit the 110 area. Over the last two years it has moved in a box from 105 to 115. Is it ready to move out of that box? If it does there will be a second target to 80 created. Momentum suggest it could happen soon. The RSI is moving back lower after not even reaching the mid line. The MACD is also turning lower towards a cross down. All of this is happening as the Euro is reaching down to the bottom of that box. Look for a move under 105 to signal continuation to the downside.
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Gregory W. Harmon CMT, CFA, has traded since 1986 and held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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