FX Concepts On "The Day The Currencies Died", Sees EURUSD At 1.26 By Mid-December

Tyler Durden's picture

Yesterday, we posted John Taylor's observations on where the EURCHF is headed (much lower). Today, right hand man Jonathan Clark follows up with his views on the EURUSD, which the world's biggest FX hedge fund now sees as testing 1.260 if 1.3160 is breached (which it probably will be as today's break in the EURUSD with ES means the AUDJPY once again is the funding carry pair du jour). Additionally, FX concepts does not see the pair passing a 1.3610 resistance, and recommend selling any temporary strength above the mid-1.36 area.

The Day the Currencies Died
By Jonathan Clark, by FX Concepts

The euro made a collapsing decline on Tuesday and this clearly signals it has begun the aggressive phase of its downtrend. We concluded two
weeks ago the euro formed a major peak, but thought some of the stronger currencies could hold up for up to another two weeks. Based upon the price action seen on Tuesday it is clear that all of the currencies have begun downtrends. Not only were European currencies down by more than 2% on the day including EUR, HUF, PLN and RON, but substantial weakness was registered by AUD, MXN and ZAR as well. On the  same day the euro broke through the bottom of an uptrend channel the British pound broke below a critical uptrend support. These factors convince us that the currency weakness is not just a European problem, although this is the greatest threat to the global recovery. Ireland is  now in a position where it must get a bailout package if it is to keep from defaulting on its debt. However, the country doesn’t appear to have the political will necessary to pass the austerity measures required to secure funding. This threatens the long-term survival of the euro.

EUR/USD is nearly three weeks into a downtrend that should last for a minimum of several months. It threatens to be very aggressive due to political turmoil alone, and if the European economic recovery falters as well the decline will prove even more aggressive. Between November and June the euro fell by nearly 22% and since the peak of several weeks ago it has only declined by 6% - so it has a long way to go. The shorter cycles call for weakness into Friday when a minor low is due and it should fall to 1.3160 before making a recovery into Tuesday. The  downtrend should then resume into the week of December 6 and possibly the following week before a medium term low is reached. Provided the 1.3160 area is reached during the next few days then we expect a further downmove to the 1.2600 area by the middle of December. The longer-term cycles call for the downtrend to last into February and probably into May.

We now expect the resistance between 1.3610 and 1.3630 to hold and any recoveries towards this area should be used as selling opportunities.

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traderjoe's picture

I realize a lot of money can be made trading currencies. But the end game seems to be approaching, and any gains will be denominated in a declining fiat currency. IMHO, the only remaining safe investments are productive land, essentials and trade-ables, and PM's. Maybe an apartment building if located near military bases or universities for the interim or some raw land instead of stuffing the cash in the mattress.

iota's picture

I said to someone yesterday things were at best reversing, at worst crashing. I thik It's going to be an interesting December and a very interesting Q1 2011.

...odd captcha: 18 times equals -666


Mr Lennon Hendrix's picture

The bond bubble has peaked and has it not popped?  What good are the IOUs of invalid claims?  The race to the bottom continues as tens of millions of people face their States and Nations bankrupt on a monthly basis from here on out.  As monie lines the IMF and World Bank coffers (pledges of anyway) the hungry grow cold in the depth of winter.  Frozen nights will be quiet, until there is nothing left but to cry. 

Europe understands the world is at a turning point; America sleeps when the TV would info mercial.  Rhythms of old have been replaced by mechanical ticks, tops, bottoms and bonfires.  Blame is controversial but in the next moment passe.  Dyes consumed by the eyes bleed into the body, suffocating the pours.  Nothing appears to let itself out alive in nature, everything has an ending.  We realize this, but fail to see the optimism.

EscapeKey's picture

The GBP isn't attracting a lot of attention. No doubt thanks to this guy, Keith McDonald, who has 10 kids with 10 different women. Oh and did I mention he doesn't work by choice?

The UK is going straight to hell.



spinone's picture

This is just another step down on the long staircase.  There isn't going to be a sudden crash, but a long slow decline in western/Anglo currencies and living standards IMO.  In combination with declinging oil extraction rates, this should equal geopolitical disruptions.

Invest in defence and oil service companies, asian currencies and exchanges, PM's.

RobotTrader's picture

I don't think there is anything wrong with either the dollar or the Euro.

Hedge funds just act like a swarm of locusts, flying to one casino table, then another.

Back and forth, back and forth.  From one Fiatsco to another.

This will probably continue for eternity.

Bill Lumbergh's picture

Sure nothing wrong with currencies based on "faith" with the backing of absolutely nothing...please keep us posted should the Euro plunge since that may "telegraph" some problems for the equity markets.

P.S. - You going to Harry's holiday bash?

Robslob's picture

I vote Lumbergh for President!

Robo can take Hilary's slot...

4shzl's picture

The euro needs to be "restructured."  And it will be be -- much sooner than most traders imagine.

CitizenPete's picture

Happy Thanksgiving! 

I think I read somewhere a while back the some of the

founding fathers of America wanted to declare the

Turkey the America's National Bird.  Now how stupid does

this sound: "Please pass the eagle."


Quinvarius's picture

There is nothing wrong with the Euro that isn't twice as wrong with the dollar.  Don't get your panties in a bunch.  The retailers need to restock before Christmas.  So you get a couple strong dollar weeks before shopping season so they can buy their Chinese products cheaper.  Anyone who thinks the currency exchange rates are not completely rigged is nuts.  China does it with ease.  So do we.

It is fine to trade currencies.  But don't for one minute think there is anything fundamental going on from day to day.  The Euro will remain the world's reserve currency.  That is correct.  I said the Euro, not the dollar.  It is far more circulated and far more used than the dollar.  If the PIIGS all get kicked out of the EU, they still owe debts denominated in Euros.  And they will stil hold Euros as a reserve currency.  It simply doesn't matter.

If the Euro is temporarily weaker, it is because the US gov wants us to buy things from Europe for Christmas instead of China.

Crisismode's picture

This is one of the most clear-headed responses on this thread so far.


Most amazing.

Keep up the good work.

ZeroPower's picture

EUR the reserve currency?

Haha, right. That's why all swaps are denominated in euros? Or why oil is priced in euros? Or why the main currency for PMs is euros?

Oh wait, none of those are correct.

Who cares if the PIIGS owe EUR debts - everyone else either holds or has USD debt 10x more.

jdrose1985's picture

LOL back to the drawing board for you.

Might want to read the 1944 Bretton Woods agreement page by page if you want to chuck your delusions and understand the primary global funding mechanism and the implications of its demise.

Don't for one think anything fundamental going on? Maybe you should study up on the last time a reserve currency had to be abandoned. You're a retard if you think this ballgame is anything beyond the first pitch.

Minion's picture

Sticking my neck out (which is what every mongoose does before attacking a snake):

Euro bounces on 1.32 and proceeds back up to around 1.45+

taraxias's picture

It is far more circulated and far more used than the dollar


Is Oil priced in euro? Nothing else matters.

If the PIIGS all get kicked out of the EU, they still owe debts denominated in Euros.  And they will stil hold Euros as a reserve currency.  It simply doesn't matter.


They PIIGS will default, they won't own shit in euros.

The euro will not be in existence by this time in 2012. It was an ill conceived concept from the beginning and the PIIGS are now paying the price it.

Crisismode's picture

Is gold priced in Euros?

Nothing else matters.

Crisismode's picture

Is wheat priced in AUD?

Is corn priced in CAD?

Is soy priced in YEN?

But then, nothing else matters.

qussl3's picture

Much more oil is traded in dollars than euros.

Far more reserves are held in dollars than euros.

The dollar has successfully stuffed QE down everyones throats without all that much resistance.

And its still the reserve currency?

The euro may have potential as a trade currency but Europe in its current form will never be lend the euro the other requirement to become a reserve currency - military clout.


primefool's picture

Bond yields everywhere are headed sharply higher - so I guess the question becomes which countries/regions banking systems survive best under a rising rate environment? On this basis US >>> Euro >>Aussie>>Japan

qussl3's picture

Anyone buying aussie banks now must REALLY buy into the mining boom BS, lol.

newstreet's picture

Robot is the new Alan Abelson.

RDP's picture

Pretty sure the "guru's" at FX Concepts were also in the camp calling for €/$ sub 1.10 in May June (2010). I'm assuming they still holding their shorts from around 1.20. I agree with those  calling for higher levels back above 1.40.

FTR, FX Concepts called for EUR/USD at 1.80 in April 2008

They also calling for lower EUR/CHF levels...good luck to anyone shorting this or EUR/AUD at these levels.

They should hire Nick Hastings from DJNW as their chief analyst...they'll then be the biggest bunch of idiots in one organsiation.

labrat's picture


To anyone who's unfamiliar with charting: meaningful breaks don't occur until the outer trendline in the timeframe of interest is breached (which I am sure Mr. Taylor knows perfectly well).  Long standing, well defined channels are an exception which this is NOT.  In this case the outer trendliine for EUR/USD is defined by the lows on June 7th and Sep 10th.  So, as of this moment, we have to fall another 40 pips before we will have a meaningful trend break.

I see this kind of misdirection a lot from players talking their book...

spanish inquisition's picture

The purpose of the Fed is for the continued survival and growth of the Fed. So from an Fx position we are discussing whats the value a dollar v euro v yen. Each currency is issued and owned by the same group. So I am guessing there is a lot of money to be made from controlling the values and raising and lowering them against each other. All you would need is one of your franchisees (ie. Goldman and hedge fund friends) touting the other side of the trade. I wonder if GS is laughing every time there is an article posted about them being idiots for picking a target. I think we have been watching this for a long time.

What do you do with all this fiat money. If things are leaning to survival, wash, rinse and repeat. If not, when everyone sees it's happening PM's will be supernova bubble and take some time to stabilize. And, if you want a heads up, I think it's time to keep an eye on raw land prices.

As for what happens, it's either grand conspiracy or unintended consequences from incompetence believing you are part of the grand conspiracy.

FoieGras's picture

The EUR belongs to 1.20 vs the USD based on purchasing power parity. Then slap on a discount of -10% or so because of structural problems (PIIGS, lack of unified fiscal policy etc.) and we're talkign 1.10.

That's where the EUR should trade within a couple years.

Grand Supercycle's picture

My long term indicators continue to warn of serious weakness for the EURO and strength for the Dollar.


johny2's picture

And by march we could have silver at 1000 dollars....