The Crack in the Euro

• Posted by Greg Harmon
• on December 21st, 2016

3 weeks ago the Euro started to move lower toward the bottom of 2 year range. At that time I wrote about the possibility of a push lower, not just to parity, but perhaps a full retracement to near 80 against the Dollar, here. Now with only 8 trading days left in the month of December and 2016, the Euro is cracking that long term range to the downside. Is this the beginning of the end?

The break of the long consolidation points to a retrace to 82, as noted earlier, but how can we be certain it will continue lower. Short answer? You can’t. But the weight of evidence supports more weakness. What evidence? First there is the strength of the US Dollar and the view that interest rates are not only going higher in the US but perhaps at a faster rate than was anticipated a month ago.

Next is the momentum running hot to the downside. The RSI is falling in the bearish range on the long term scale. The MACD is about to cross down as it reverses in the negative range. Both of these support more downward motion. And then there is the range break after holding for over 2 years. All of these point to the Euro continuing lower. It may not be a straight line down, just like the move higher off of the 2002 low was choppy, but the easier path is to the downside.

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