Could the Euro Trigger A 2008-Like Crash? Si, Oui, Yes.

If we dispense with all the fancy stuff, we end up with a simple see-saw with the euro and global equities on one end and the much-hated U.S. dollar on the other.

If we scrape away the ever-hopeful headlines predicting a new figurehead lackey or another vote will magically fix Greece, Italy, the euro, Europe’s crumbling banks, etc., the global stock markets can be distilled down to one chart. And here it is: a see-saw with the U.S. dollar on one end and the euro and equities on the other.

I know the mind rebels at such simplicity, and so does the entire buy-side Wall Street edifice: if it all boils down to this, then there really isn’t much value added by the endless reams of fancy reports and analysis, is there?
But let’s presume for a moment that it really is this simple. Where does that leave global stock markets? The answer can be had by glancing at two other charts: one of the euro and one of the dollar.

Now that the cargo-cult chiefs are openly talking about the euro splintering into euro 1 and euro 2 (i.e. business class and steerage), something I proposed as a possible “face-saving” step in the devolution of the euro 18 months ago ( Why the Euro Might Devolve into Euro 1 and Euro 2 March 2, 2010), then the common-sense question is: why is the euro worth 36% more than the dollar? The answer is that it isn’t worth 36% more, of course, and for a bit of technical support of that we turn to a simple chart.

There’s not much to support Bulls’ claims of euro strength here and much to suggest the euro is in a leaky barrel floating helplessly toward Niagara Falls.Classic wedge broken decisively to the downside, check. Uptrend decisively broken, check. RSI declining but not oversold, check. MACD declining and below the neutral line, check. Price below the critical 200-week moving average (MA), check. Price below the equally critical 50-week MA, check.

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Read More at charleshughsmith.blogspot.com  By Charles Hugh Smith