I wanted to elaborate a little more on the chart I came up with yesterday regarding the EUR/USD. This recent rise from $1.18 to $1.40 went much higher than most would have expected. What's interesting from a contrarian point of view is that not too many of us would expect the EUR/USD to fall down to the $1.25 area in the next two to three months. I'm bringing this up because we had the same exact situation in late 2008 when the EUR/USD rallied from 1.23 up to 1.46 in a matter of 3 months. The EUR/USD had retraced 61.8% of the initial drop from $1.6050 down to $1.23. What interesting to see now is that the EUR/USD has retraced 61.8% of the last big drop from 1.51 down to $1.18.
The question is : Are we going to repeat ?
With most technical and sentiment indicators screaming "get the hell out of the Euro" I would start to anticipate a sharp move down.. sharper than anyone would expect !