Watching EURUSD After a Historic Crash

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The EURUSD is down 13 of the last 15 months. That is red after red after red. The bearish sentiment is about as extreme as I can remember, ever, for any currency.

I usually do not trade FX and I should be clear, I do not have a position in the Euro at this moment. But I do want to write about a few things that have caught my attention.

Foremost, I think it is pretty interesting that the EURUSD is not only at parity, but also slightly below parity. This makes capital flows rather easy, if not effortless for Americans to invest in Europe or want to get involved in Europe. It also makes exports more competitive for Europe to other countries. There is a point where these levels just do not make sense from a broad, macro standpoint.

The strength of the Dollar makes investment into Europe that much more attractive. If you have dollars, you can now afford more. I would add that there are 764 million people in Europe, with many of the greatest cities on Earth.

Actually, that is something that I do find interesting. I follow many smart investors/traders on social media. The majority of them are extremely bearish on Europe and the Euro. I have seen it all from them - social disparity! energy crisis! bad leadership! And the list goes on. HOWEVER, when I see that they are on vacation, with the family or taking time for themselves, where do they go? Pictures of Italy, Greece, and more. I find this to be a tad ironic, and also interesting. What I mean is, to be so bearish about a region, but then for that region to also be your number one vacation spot. I myself need to get back to Europe - I really love French organic wines!

One more important thing about a weak Euro: it makes European exports far more competitive. When they produce goods, relative to the Dollar, it now does not cost as much. In addition, that means they can sell their product for less. This means they can compete with more brands and services. It will lower prices, thus, make the product more attractive and easier to consume. Exports can be a great thing for a country! In this case, it's for many countries across Europe.

There are many more interesting developments that I am thinking about - for example home buying the region, but that is for another post, and let me not waste any more of your time.

Let's talk trade levels!

The levels in yellow that I marked are from 2001/2002. That happened after the tech crash. If this is another tech crash, well we have further to go.

In addition, that kind of pattern, and price behavior might be something to WAIT for. Hey, what's the rush.

Lastly, I did highlight the extent of this sell-off. Month after month of selling. Even as a mean reversion trade I would wager there is some potential to return to rather significant moving average. The 200 day moving average is at 1.24, for example! Could it ever return there? If you do your own research, check out where the 50-day and 100-day moving averages are. You may also find that interesting.

Okay that's all for now! Thanks for reading and good luck.

ノート

EDIT: 200 month moving average ;)

I made a mistake. It is NOT the daily average. IT is 200 month moving average.

Nonetheless, a very MEH/AVERAGE idea so far.

Not an easy market to trade...