The European Union has put in place a whopping $1 trillion rescue package to stave off a widespread crisis in the eurozone and save the beleaguered euro currency. All is well and the euro exchange traded funds (ETFs) are now making a comeback…right?
Not so fast. In fact, euro-focused ETFs after rallying slightly yesterday have resumed their decline today on doubts that the eurozone won’t actually be able to contain its debt crisis. The primary concern is whether the weaker economies in the union can deliver big debt cuts.
Alexander Green for Investment U also believes the euro may have further to fall. Around five months ago, Green predicted an appreciating dollar against the euro while most staunchly believed that the weaker dollar was “the ultimate no-brainer.”
The eurozone will likely see strong opposition from both the weaker states who don’t like others dictating their economic policies and stronger states who don’t like spending billions to bail out wanton spenders. [Europe ETFs Get Socked by Greece Crisis.]
When the euro came out in 1999, skeptics believed that the member states were too disparate to share a single currency and monetary policy, and the euro traded under $0.90 as currency traders doubted the viability of the new currency. Today, we are seeing that the problems first thought up back in 1999 are playing out just as the skeptics thought.
Green believes that the euro will continue its downward spiral to $1.10 by he end of the year and trade at parity with the U.S. dollar next year. [U.S. Dollar ETF Has Its Moment in the Sun.]
Whether this actually comes to pass remains to be seen. Right now, euro funds are well below their long-term trend lines and if the doubters are right, they may have further to fall. While you wait it out, there are other currency opportunities out there. The U.S. dollar, Australian dollar, Brazilian real and others are well above the 200-day moving average. [Our Guide to Currency ETFs.]
For more information on the euro currency, visit our euro category.
- CurrencyShares Euro Trust (NYSEArca: FXE)
- WisdomTree Dreyfus Euro (NYSEArca: EU)
- PowerShares DB U.S. Dollar (NYSEArca: UUP)
Read the disclaimer; Tom Lydon is a board member of Rydex|SGI.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.