The Euro Can Go Much, Much Lower from Here

I lived in Europe when the Euro was unveiled and implemented. I remember full well that it was designed to trade within a 10% range around parity with the US dollar. I remember vividly how it fell to $0.82 within a year of being unveiled in 2000, as currency traders in London began speculating that it was a failed currency and would be torn by different fiscal policies across the region.

I also remember in late 2004 when the Euro raced across $1.15 and the same currency experts said that while the fundamental concerns were gone, the Euro wouldn't break $1.20. Yet it did, in early 2005.

Now, the fundamental concerns are back and they are stronger than ever. The Eurozone is unsustainably leveraged. Yet, the level that had been the ceiling when the fundamental concerns where gone is now the floor when they are back?

I think that the Euro can go much, much lower. I am not shorting it nor encouraging anyone else to short it because I don't play in currencies.

I am concerned because most of Wall Street's earnings estimates are based on the presumption that the Euro will not break below $1.22. If it does, we could see much lower levels in the stock market.