Gotta give the euro credit

Someone out there sure likes these things.

The bad news has been almost relentless since August but the euro continues to hang in there. At 1.33, EUR/USD iss down almost 10 cents in that time but that’s not bad considering the existential crisis pounding away at the bulls. Moreover, EUR/USD is holding above the 2010 low of 1.1876 and the 2009 low of 1.2331. We are almost at precisely the same levels as this time last year.

I’m bearish on the pair and that isn’t going to change any time soon but I have to concede that given everything we have learned in the past year, I’m impressed the experimental currency is hanging in there. The banks and countries are bordering on insolvency and a recession is on the horizon but someone is still buying.

You have to wonder where we would be if Europe’s banks and governments had some a slightly better job of managing their books. It may take a long time to sort out and that will undoubtedly keep the downward trend going but I’m starting to think that one day the euro will soar from the ashes, in some form.

It would be easy to point at the other side of the equation at USD but the analysis doesn’t hold up. The euro is well above its credit crisis lows against GBP and CAD while holding above the early 2011 lows in AUD and NZD.

EUR/USD rallied into the end of last year and everything tells me it will do the same in 2011. The speculative market is heavily short but the next 10 days will be round after round of short covering.

I don’t fight long term trends but my best idea here is to hope for a selloff on Friday/Monday and then jump in around 1.32 with 1.3144 as a stop and a target of 1.35.

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