Image by: Andrea Guerra
By Steven Morrison II
Much of Europe continues to struggle under the weight of the great recession, which is still pulling down the European Union’s weakest members to shocking lows. Greece is still the wildcard, living on the edge of turmoil, relying on the generosity of the other union members for survival.
Meanwhile, EU powerhouse Germany has seen its fortunes fall as growth has slowed to nearly a crawl.
Yet something remarkable has happened to the euro – well, remarkable for a currency that was trading at $1.48 against the U.S. dollar back in March 2011, and $1.57 back in 2008. But that was then and this is now.
Since Nov. 13, the euro has been on a steady incline. In half a month it has gone from just below $1.27 up to a robust $1.29. It will most likely hit the ceiling at $1.30, possibly $1.31. And the speculators and data crunchers don’t really see it going much higher, so you may have missed a short-term opportunity to cash in.
Expect that same trend to continue into 2013 with minor raises and drops around the $1.30 mark. But then analysts say that a wave of influence and reality will come crashing in once Spring hits, which will then drive the euro back down to $1.23 by the end of 2013.
And the euro should be happy with $1.23, as players such as Commerzbank AG originally had the currency finishing the year at $1.16. But many positive factors caused Commerzbank and others to modify their original projections and adjust their thinking just before the end of the year, as reported by Bloomberg.
Possibly the largest such catalyst was the European Central Bank’s aggressive plan to stave off the debt crisis by purchasing government bonds form those countries in the dire-est of straits. By all accounts this has worked brilliantly as a short-term play, kicking the doom can down the road at least several months.
OK, so you have a good idea of where the euro is going, so how do you cash in? With all of the sideways activity expected for the first half of the year, it seems like the euro might not be that much fun to play with. Most of the positive action has already taken place, if the prognosticators are to be believed.
But come Spring, if the euro is still at or near $1.30, that would be a great time to bet against it and ride that out until it reaches $1.24 in December 2013, and then continues to nose dive into 2014. Of course, currency market maker Forex is a reliable place to make that bet.
Bad for Europe, good for the savvy investor.