By: Christopher Lewis

In one of the most ominous signs we have seen so far out of Europe, the Germans only managed to attract buyers for a little more than half of the 6 billion Euros’ worth of their 10-year bunds on Wednesday. The Germans are seen as a backstop to the entire issue coming out of Europe. The real question then becomes: “If they won’t buy German debt, which debt will they buy?” The answer is obvious: America’s. Needless to say, this doesn’t bode well for some countries like Portugal, Greece, Italy and Spain.

The real problem comes down to confidence. The fact that the Germans couldn’t sell their bonds to the market is a sign of real contagion, and that the debt crisis is now entering a very dangerous phase. Greece falling apart is one thing, but with German being over 80% of the worth of the EU, this has the possibility to become an absolute disaster.

Without the ability to sell bonds at a cheap rate, this is going to push the ECB into printing Euros before it is all said and done. The value of the Euro will have to fall if the EU ever plans on paying off debts. If it doesn’t – the value of the Euro has to fall as well, as nobody will want to touch it. The writing seems to be on the wall, and it suggests a much, much lower valued Euro. With this in mind, the Euro becomes quite easy to sell.

It should be noted the fall in the value of the Euro isn’t equal against all currencies. While the Dollar did gain significantly today, it has struggled to push lower lately, and the 1.35 level seems to be a real area of contention. The area was broken this morning, but the entirety of support down to the 1.31 level is pretty obvious. With this in mind, there are other currencies to trade the Euro against, and it will more than likely be the Euro crosses where you will find you biggest returns.