From Taki Tsaklanos: We covered the US dollar extensively in recent weeks. We said we are bullish on the dollar. In fact, we thought the dollar had the best chart setup of most assets after the Fed’s rate hike in December. We also explained why the US dollar long term chart is bullish.

Consequently, as currencies move in pairs, the Euro should not look very bullish. To verify that point, we cover the Euro long term chart in this article.

Below is the 20 year chart of the Euro. It goes without saying that it is about to break down. The 104 level provides secular support, going back even to 1998. This is the third test in 24 months.

If this level does not hold, there is almost nothing in the way to the 85-86 level. That is the lowest support level from the last 2 decades. We are not saying that the Euro will fall, with certainty, to 86 points. The correct way to read this chart is to monitor what happens at the 104 level: if there is no significant bounce from here, which would take the Euro above 114, we would e looking at two potential scenarios:

1. Either a trading range between 104 and 114.
2. Either a big breakdown, in which case the next strong support level is 86.

It is a bit too early to say what exactly will happen, but given the very strong dollar setup, the not so constructive setup of the Euro, and the money creation machine in the European HQ of the ECB, we believe there is a very fair chance that the Euro will break down in 2017.

The ProShares UltraShort Euro (NYSE:EUO) was unchanged in premarket trading Tuesday. Year-to-date, EUO has gained 7.56%, versus a 10.74% rise in the benchmark S&P 500 index during the same period.

EUO currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 5 ETFs in the Inverse Currency ETFs category.

This article is brought to you courtesy of Investing Haven.

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