Tags: sean | hyman | euro | dollar | european | stocks

European Stocks May Halt Euro's Rally

By    |   Monday, 16 May 2011 08:05 AM

A week ago, the euro broke its six-month rally against the dollar. There were no major pullbacks in the EUR/USD pair during that time.

Everyone had gotten on one side of the board on what they thought was a “free money train” — a one-way bet in the dollar.

However, every bear market has bounces and the dollar is recently experiencing one of them. It’s particularly ganging up on the anti-dollar (which is the nickname for the euro).

But now there is a new catalyst that could very well spur the next round of selling in the euro. It’s the German DAX-30 and the French CAC-40 stock indexes.

Join the 3.5% of Americans who are truly wealthy and financially secure.

 
On Friday, they both breached their recent uptrend lines. If the market isn’t able to quickly readjust and get those indexes trading back up above those trend lines, then the short sellers will have won control and will then take the ball and run with it.

Any major weakness in these stock indexes would trigger another round of “euro selling” as investors try to flee the unstable area for greener pastures.

Right now, the eurozone has enough troubles with all of the debt crisis issues that are going on there. Recently it’s been enough to start turning the tide against the euro. But now, if these stock indexes turn south, the next round of euro-selling will happen as well.

Of course if commodities continues their seasonal weakness over the summer, then this could boost the dollar even more in the near-term too. That would be bad news for the euro.

And with Japanese stocks being so weak, any European stock market weakness could spur selling in Japan too. Well, with bad sentiment in both of those areas, it wouldn’t take much for it to spill over into America’s stock markets too … and thus we’d have the “sell in May and go away” dynamic working against stocks once again.

So the summer months could be very choppy for stocks and could actually give the dollar a much-needed boost in the near-term. Enjoy that while it lasts because “dollar rallies” are temporary. They can last for weeks to months. But it’s a rare event anymore when the dollar has a rally that lasts a year. Therefore, I anticipate that any bump up in the dollar will likely only last a few months at best.

Then it’s long-term downtrend will continue and the higher-yielding commodity currencies will regain their lead (such as Australia’s dollar, New Zealand’s dollar, Canada’s dollar, Norway’s krone and Mexico’s peso). But until then, any of these could suffer a temporary set-back as the dollar bounces near-term. After that passes, these other currencies stand a great chance of rising considerably.

About the Author: Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of Money Matrix Insider. Discover more by Clicking Here Now.
 

© 2017 Newsmax Finance. All rights reserved.

 
1Like our page
2Share
SeanHyman
A week ago, the euro broke its six-month rally against the dollar. There were no major pullbacks in the EUR/USD pair during that time. Everyone had gotten on one side of the board on what they thought was a free money train a one-way bet in the dollar. However,...
sean,hyman,euro,dollar,european,stocks
500
2011-05-16
Monday, 16 May 2011 08:05 AM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved