EUR/USD has been a bit wild lately, as traders try to figure out what's going to come out of the European Union meetings. If history is any guide, it will be much in the markets will be disappointed in the politicians yet again. However, I do find it interesting that the market hasn't bought of the Euro with any great gusto the front run the announcement this time. I think that perhaps the markets are finally starting lose their patience with the children the run the EU.
Many years ago, Pres. Bill Clinton found out the hard way that the bond markets control a lot of what a government can and cannot do. He is even quoted is asking the question, "Do I really have to listen to what a bunch of bond traders think?" He found out rapidly that the answer of course was yes. This was the beginning of the United States cleaning up its balance sheet. Believe it or not, there was a point in time when the US wasn't in debt.
With this being said, we could be approaching this time for the European Union. This is the 19th meeting that we have seen out of the EU in order to fix this crisis. At this point in time, the drama has become far beyond absurd. With this in mind, it's very likely that we will continue to see Euro weaken over time.
Bearish flag at 1.25
The bearish flag on the chart is still very much intact, and still very much looks like a signal to sell this market. If you measure the bullish flag, we are heading to the 1.15 level albeit over time, not tomorrow. For me, this makes sense as this would suggest a longer-term decline of the Euro in general.
A decline would make sense, as the European Union will continue to struggle with debt and stagnation. This doesn't necessarily mean that we need some kind of worldwide depression the trigger this move. In fact, many of the traders that write me and question why I'm so bearish on the Euro are surprised to find that the actual opening value of this pair was 1.18 just over a decade ago. In fact, the true fair value is somewhere in the neighborhood of 1.21 over time. So to suggest a 1.15 handle really isn't that outrageous if you think of it.
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I am still short this pair, and will be unless we see a break above the bottom of a bearish flag. I would sell all rallies, and will become aggressively short once we are south of the 1.23 level. I have absolutely no plans of buying the Euro at this point in time.