In mid-December, we nailed the textbook "1-2-3" trend change in the euro... the pan-European currency everyone loves to hate right now.
Back in December however, the euro wasn't so hated. The currency's value was near a yearly high... It was the U.S. dollar and the monster debts behind it that folks hated. But just after our column, the Greece debt problem hit the headlines. Sentiment and trend changed in a big way. The euro fell 6% in two months... which is a drastic decline for a major currency.
But now that "euro implosion" and "Greek debt crisis" are regular evening news fare, everyone is bearish here. Big hedge funds are holding a record amount of bearish bets against the euro. In a great departure from mid-December, it's now one of the most popular trades in the world.
Bottom line? Long term, the euro, like all paper currencies issued by spendthrift governments, is headed lower. But short term, everyone and their brother sees the euro as a can't-miss short right now. The market is set to do what comes naturally... which is to soak as many people as possible. Get ready to see a euro bounce.
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