The Euro's Viral Turn Is More Than Pseudoscience
The currency’s drop below a key technical level reflects deteriorating dynamics in the continent’s fight against the pandemic.
The AstraZeneca halt has shaken confidence in Europe and its currency.
Photographer: Andreas Solaro/AFP/Getty Images
One of the strongest market trends of the last 12 months appears to have broken. The euro is no longer on a consistent upward path compared to the dollar, and this has ramifications for virtually everything else. A weaker dollar makes life easier for emerging markets, and for the U.S. It also makes U.S. inflation that much more likely. Beyond that, it more or less directly implies that Europe is a better investment for now than the U.S. There have been enthusiastic bets on all of these things. So how seriously should we take the change in the trend?
There is a lot of pseudoscience in technical analysis, which can make analyzing chart patterns look much more complicated than it is. But the tale of the euro is clear. It has just dropped below its 200-day moving average for the first time in 10 months, is at its lowest since last November, and is no higher than it was in July. Optimism about a stronger euro is being put to a rigorous test: