Europe, Euro & USD Updated

With USD at the 50 day averages at yesterday’s close…

usd

and the UUP ETF breaking through it today…

uup

and the Euro breaking below the 50’s…

xeu.mo

and the Euro’s big picture view still very bearish…

xeu.mo

and given the fact that the proposed play on Europe has been based on Euro weakening QE by ECB, and in consideration of the negative hype associated with the Greek debt crisis it is possible that some of the conditions are coming into place for another trade on Europe.

Again, I would rather get 3200 on the STOXX index in order to initiate the HEDJ (Euro hedged) ETF, but this update is not about what I would rather have, it is a snapshot of where things stand now.  And right now the USD looks bullish and the Euro bearish.

The currencies could reverse again tomorrow (i.e. the USD break above and Euro break below the MA 50’s could be a head fake), given the inflammatory things in the news.  But as of now, the Euro is looking more bearish, and that was an original condition of the Euro QE trade we have been anticipating.

Another consideration is that I am expecting the US markets to find resistance on this bounce.  So weak Euro or not, a US and global stock correction, if it comes about, could pressure European shares.

As with all markets right now, patience is advised.  As a final caveat, the EWP-EWG (‘apples to apples’, Euro unhedged) equity credit spread is weak today (a negative divergence), so this argues even further for patience.

The ideal buy on Europe could be during a global market correction, STOXX at 3200, Euro weak and EWP-EWG (and IBEX-DAX) sporting a positive divergence.  Now we will see how it actually plays out.