Euro outlook: Trading plan for Friday and next week

Euro hit a 4 year low on Wednesday, bottoming at $1.22 and by early Friday morning in Europe was already stable at a one week high comfortable above the 1.25 to a dollar threshold.

So what is in store for the euro in the upcoming days/months?

The debt crisis in European Union is continuing to worsen and the credibility of both the euro and the ECB have been severely impacted. While in the long run the Euro slide is going to help fix a number of monetary imbalances across Europe, ECB’s move to guarantee the debt obligations of faltering countries has propagated the risk from a few countries like Greece, Portugal, Italy and Spain to the entire Euro Zone. Furthermore, their commitment to vouch for these debt obligations have put ECB in a precarious situation of most likely having to print Euro’s in the future putting downward pressure on the purchasing power of the dollar. Euro Zone’s debt issues and imminent slowdown in economic growth have also started to raise concerns about the growth of the Emerging Markets economies outside of the Eurozone are heavily reliant on exports to Europe.

All these factors do not bode well for the Euro in the long run or the global economy in the short run or for crude oil demand growth forecasts. Given the recent decline of the Euro, it is likely that the currency will rebound going into the last trading day of the week, however, Euros luster has been lost and serious concerns remain on the long term viability and existence of the currency….

Position recommendation: Exit short positions and wait and watch….