The Euro has been forming a Head and Shoulders chart patternrn since 2010. This suggests the euro zone’s currency peaked in 2008 and will continue to weaken.
Here’s a close-up…
This year, the euro broke below the “neckline” of the patternrn. It then bounced higher to re-test the neckline level (which is common for this patternrn) before continuing its descent.
The Head and Shoulder patternrn gives us a useful measuring tool. It suggests the euro could tumble as low as 1.1350 against the dollar (another 1,500 pips lower). That’s a full 30% drop in value from the height of the euro’s strength in 2008, when it took $1.60 to buy the euro.
Watch for our bullish U.S. dollar position to continue moving higher as the euro zone searches for a savior – socialist, technocrat or otherwise.