The euro recently fell to its lowest level in months. Depending on your view, that’s either a buying opportunity in euro exchange traded funds (ETFs) or the sign of a potential long-term downtrend.

David Russell for Seeking Alpha reports that traders look like they’ve gone bullish on the euro, based on options activity witnessed in CurrencyShares Euro Trust (NYSEArca: FXE). [ETFs Start 2011 With a Bang.]

Other trends seen in the currency include:

  • Javier E. David for The Wall Street Journal reports that investment professionals view currency funds as a growth sector that can provide protection against riskier assets or allow buyers to reap higher returns in a volatile yet profitable market. The economies with the stable fundamentals and good governments are the currencies that you want to follow. That may not be Europe at the moment, unless you’re fine with the risk that the euro could still have further to fall.
  • ETF Daily News reports that the falling euro is leading to one of the biggest investment opportunities in a while. As the sovereign debt crisis mounts, the window for investment in euro ETFs is getting larger.
  • Bryan Rich for Money and Markets reports that the world is getting more bullish on the outlook for the U.S. while the outlook for the eurozone looks like it may collapse. Nearly $1 trillion of sovereign debt needs to be refinanced this year in Europe.  Higher interest rates are the only answer to offset this inequality. Rich feels that shorting the euro is the way to go. [4 Currency ETFs for a Falling Dollar.]

As you can see, the opinions are all over the map. So let’s look at what we know for sure: euro ETFs are below their long-term trend lines. They may re-cross that mark, presenting a buying opportunity, or they may sink further. If you want to own euro ETFs, use a trend following strategy and set up trading alerts to be notified when the euro crosses back over.

In addition to FXE, the other long-only euro play can be found in the WisdomTree Dreyfus Euro (NYSEArca: EU). The currency can be shorted with ProShares UltraShort Euro (NYSEArca: EUO).

Read the disclaimer; Tom Lydon is a board member of Rydex|SGI.

Tisha Guerrero 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.