The Euro$ is sitting right on top of its 200-day moving average at 1.28237. The chart shows this is an important level as it has provided support over the past few months and once breached usually leads to sustained weakness.
Note in September 2011 the Euro pierced its 200-day at 1.40 and, after a brief spike above the 200-day in November, the currency traded down almost 15 percent before bottoming in late July. Clearly, policy uncertainty and Eurozone financial instability were key drivers in the Euro’s collapse, but the breach of the 200-day did signal all was not well.
We have no direct skin in the game but are watching closely how the Euro trades around this key support level. We suspect the outcome of Tuesday’s U.S. presidential election may impact its short-term direction. A Romney win leads to a stronger dollar/weaker euro and vis-versa, on the margin, if the President is reelected. Oh, and don’t forget, Greece is the word.
(click here if chart is not observable)