Hedge Funds Bearish On Euro, German Banks Speak (XEU/USD, XEU/XJY, XEU/GOLD)

This was an interesting report out of Deutsche-Welle on 2/24/2010 on how banks view the Euro's future. Deutsche Bank didn't comment but economists at Deka Bank and Commerzbank did.  People on the street said they were used to the currency and didn't see a need to switch. Today (Saturday, 2/27/2010) all eyes are on Greek debt.  Germany, France, Dutch to buy Greek bonds: MEP (Reuters).
"ATHENS (Reuters) - Germany, France and the Netherlands plan to buy Greek bonds to help Athens cope with a severe debt crisis, a German member of the European Parliament said on Saturday." [full article]

Greece must take more measures or face sanctions: report (Reuters)
Flip Floppage (2/28): Greece may take more debt steps (Reuters)

Here's a look at different angles of the Euro, specifically Euro Index/US Dollar Index [$XEU:$USD], Euro Index/Gold-Continuous Contract [$XEU:$GOLD] and Euro Index/Japanese Yen [$XEU:$XJY].  All are weekly charts. I looked at Euro/Gold on February 14 and the ratio was at 0.12.  It's at 0.122 and testing the February 2009 ratio low.  Euro/Yen could test the February low at 1.15 and Euro/USD needs to hop out of its downtrend channel to see sustained upside momentum.  If Euro/USD shorts cover they could rally the pair to downtrend resistance and quite possibly rally Greek shares given the 5 month price relationship. It all depends if heavily armed HFT bots somewhere decide to lay out the large net-short Euro speculators or at least shake out the weak hands.
"NEW YORK (Dow Jones)--Investors continue to bet record amounts against the euro for the fourth-straight week, according to data released Friday, as concerns over Greek sovereign debt keep the common currency under heavy pressure." [read more]

Here are professional perspectives.  A few days ago Dennis Gartman (Gartman Letter) was interviewed by IndexUniverse and said he'd rather be short Euros priced in Gold than US Dollars.  That would mean the first chart is going lower.  This is interesting, WSJ wrote about a recent anti-Euro hedge fund meeting in Manhattan which included Soros Fund Management, SAC Capital, Greenlight and more.  So it's now hedge funds vs. Europe.  These hedge funds could be net short Euros or hedged with calls on futures or FXE.  Either way, hedge funds and their significant others are positioning to ride a Euro wave.
"..a small group of all-star hedge-fund managers argued that the euro is likely to fall to "parity"—or equal on an exchange basis—with the dollar, people close to the situation say." [read full WSJ article].  (Gary Shilling also thinks the Euro will hit parity with the Dollar, videos here)

Euro Index/Gold-Continuous Contract

Euro Index/Yen Index

Euro Index/US Dollar Index

[Charts courtesy of Stockcharts.com]