Early last week, I noted in one of my posts that I saw many traders trying to short the $EUR/USD here, awaiting a seemingly imminent breakdown. I continue to believe that such a bet is foolish. Pertaining to equities, the $EUR/USD relationship has been a proxy for risk appetite in recent months.
If the Euro was going to parity versus the Dollar, then equities would surely suffer for a myriad of reasons, one certainly being that U.S. firms would get crushed with a stronger Dollar vis a vis exports.
As the updated $EUR/USD chart illustrates below, the 1.27 level has been previous, multi week resistance. It now appears to be turning back into support. From my vantage point, it is no coincidence that equities have been performing markedly better since this currency pair put in a bottoming pattern, and has been acting more constructive ever since.
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Agreed, looks like 1.31/2 is where the Euro wants to go. I won’t be surprised if it then turns down again though.
Yup–at that point more a short.