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The Euro Is Going on SaleBy Jeff ClarkTuesday, January 5, 2010 The law of gravity can only be ignored for a short time. At some point, everything that attempts to fly skyward must come back down to Earth. The law applies equally to birds and to planes and to objects that had no business rising into the sky in the first place.
Like the euro...
Of all the amazing feats in the financial markets last year, the most remarkable is the dramatic rise of the euro. As you can see from the following chart, the euro rallied 20% between March and December...
 A 20% rise may not seem like much compared to the 70% gain in the major stock market averages. But for the euro, a 20% gain is a feat equivalent to levitating a bowling ball. It defies the law of gravity.
As of December, however, the trend has changed. The euro dropped 5% last month, and common sense argues it will continue to fall.
You see, the euro is the official currency of 16 of the Eurozone Member States, almost all of which are in worse economic condition than the United States. As despised and maligned as the U.S. dollar is because of the dangerous fiscal and monetary policies of the U.S. government, the dollar is at least backed by the full faith and credit of the U.S. government.
The euro is guaranteed by nothing. And with countries like Greece, Spain, Italy, and Portugal in Dubai-ish financial condition, the time is right for the euro to come back down to Earth. The action in December was just the start. When the little "dead cat bounce" – which has lifted the euro over the past week – comes to an end, expect the currency to give up another 5%-10% during its next leg downward.
What goes up, must come down. And anything that went up with the euro is likely to come back down with it as well. Keep that in mind if you want to make money off this trend.
Best regards and good trading,
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