Euro Continues to Flirt with Disaster

• Posted by Greg Harmon
• on February 16th, 2012

The Euro continues to confound traders as the situation in Greece seems to change every 5 minutes. When I last checked in on it (The Euro, Time to Move to the Other Side of the Boat or Sinking Ship) the short term picture was getting a bit blurry and it looked like there might be a bounce but the long term trend looked lower. One month down the road we see that that bounce did happen but has anything changed with the long term picture? let’s take a look.

Currency Shares Euro Trust, $FXE, Daily

Our stock proxy for the the Euro, Currency Shares Euro Trust, $FXE, shows the break of the downward channel and move higher through early February. That run higher seems to be losing strength now. The Relative Strength Index (RSI) that is falling and making a new low and the Moving Average Convergence Divergence (MACD) indicator that is about to cross negative both support a continued move lower through support at 130. A break lower sees support at 128.40 and 126.25 before triggering a downside target on a Measured Move to 116. The weekly chart shows the continued move towards the Median Line of the Andrew’s Pitchfork, but through a move sideways instead of higher. In fact the current weekly candle is building to be a bearish engulfing

Currency Shares Euro Trust, $FXE, Weekly

candle. It needs to be confirmed lower to trigger more downside but the supporting cast is betting on it being confirmed. The RSI is bearish, falling back and never made a new high. The MACD, after improving to the zero line, is now glancing off back lower instead of crossing, and the Simple Moving Averages (SMA) are pushing it lower. A move to support at 125 is back on the table and attraction to the Lower Median Line below from there. And with one extra candle the monthly chart at mid month is trying to avoid confirming the Hammer from January. Keep an eye on this one. A

Currency Shares Euro Trust, $FXE, Monthly

monthly close below 130 would signal a continued move lower to the bottom of the channel, in line with the measured Move from the daily chart at 116. The RSI and MACD on this timeframe certainly support more downside as well. So the broad picture of a continued move lower remains in tact. Flirting with disaster.

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