The Euro as a Short Trade

It's pretty hard to make money trading currency based ETFs as the moves are not all that big, if you are trading the FX market, it's a different story due to the leverage, but there is a leveraged Euro Short, EUO and it may start making sense soon.

The macro trend is where it is very interesting, this is something I have mentioned over the last few months in the $USD (according to traditional FX arbitrage, it would have negative implications for the market).

Lets take a look at both EUO and the Dollar Index.

 Here's EUO (Euro Ultrashort) on a 4 day chart as this reduces noise, as I showed you in the last post  regarding technical levels, the Euro looked very toppy in that large channel and in fact had broken down from a top on the daily chart, EUO would be expected to look the opposite of the Euro and it does have the look of a base as well as a surge in volume and a positive divergence on a long term 4 day chart.

 The 3 day chart also shows the same positive/leading positive divergence.

 And the 1 day chart confirms the same.

 Since EUO is a short on the Euro and the Euro moves opposite of the dollar, the $US Dollar Index should look similar to EUO.

Here's the Dollar Index

 Here's a longer term 2 day chart with a very strong leading positive divergence, much bigger then the 2008 positive divergence that sent the Dollar up approximately 25% which is a large move for a currency in that short of a time period.

The daily chart which I have featured over the last several months also seems to be putting in a stronger positive divergence then 2008 and it in fact looks like it has already started moving out of the base, which would make sense according to the daily chart of the Euro which had already broken down from a daily local top.

The idea will be to look for a low risk/high probability set up in EUO, I think the long term charts show it to be a good trade strategically, now if we can just find a tactical opening.