Euro--Wednesday, July 16, 2008
Two models:
THe first, with the December 2004 top as an alpha and the November 2005 low as beta, posits a top around 1.6950..
The pattern on tha monthly chart:
The pattern on a weekly chart:
The second only looks for patterns after the 1.1640 low in November 2005. The high around 1.2980 in June of 2006 is seen as the alpha of the new base. The low the next month at 1.2458 would be the beta. The pattern would develop as follows:
On the monthly chart:
And on the weekly chart:
The first scenario is more in keeping with current bearish sentiment in financial markets. It is, relatively speaking, an easy call. It assumes there will be more problems with banks, a full GSE bailout becomes necessary, etc..
The second runs counter to current sentiment. It posits that the euro high is in, that there will be some sort of rally in US financials, and by the time that rally has run its course perceptions of the relative strengths of the U.S. and european economies will have changed to the extent that the euro will no longer seem a safe haven.