Why the Euro Has More Room to Fall

Published: Tuesday, 13 Sep 2011 | 12:12 PM ET
By: Kelley Holland
Currency Blogger, CNBC.com
 

 

 

 

 

 

 

It’s not just the euro’s troubles making a certain euro-dollar trade look good. It’s also the dollar.

All the fear and loathing aimed at the euro[EUR=X  1.3696    0.0029  (+0.21%)   ]  lately has obscured the outlook for the dollar[.DXY  76.99    -0.60  (-0.77%)   ]- which in relative terms is pretty good, says Todd Gordon, co-head of research and trading at Aspen Trading Group “We’ve been talking about the euro but the dollar has asserted itself as the safe haven currency,” Gordon told CNBC’s Melissa Lee, especially since the Swiss franc[CHF=X  0.8789    -0.0015  (-0.17%)   ]and Japanese yen[JPY=X  76.89    -0.26  (-0.34%)   ]are facing government intervention.

News events are making investors run scared, Gordon says, and “U.S. dollar and risk aversion will continue to be the choice.” On the other side, last Friday’s resignation of Germany’s Jürgen Stark from the European Central Bank “opens the door” to interest rate cuts in Europe, Gordon says, as does the imminent departure of Jean-Claude Trichet.

Technical patterns also suggest the euro is due to fall further, Gordon says. Looking at Fibonacci patterns, he compares each corrective leg to the next corrective leg, and that suggests the trade is to go short the euro against the dollar at $1.37 with a stop at $1.39 and a target of $1.32.

Oh, and step lively. Gordon notes that the euro has been falling precipitously in the last few days, and he thinks that $1.32 target could be reached this week or next.

Tuesday, September 13th, 2011 Forex Trading

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