In government and mainstream media logic, the bailouts are supposed to be good for the euro. With EUR/USD pushing 1.27, it appears that somebody forgot to tell the market that implied guarantees for GIPSI nations to the tune of 100s of billions of new euros should strengthen the value of those in circulation.
Here’s a 10-year view of the spot market, revealing just how much downside there is in this cross. On the other hand, the euro is getting oversold on a short-term basis, with RSI approaching the conditions preceding the short but violent rally in late ’08. It could trend a little while longer, but don’t get caught short without your stops.