Long term Euro outlook

Today the EU finance minister's meeting concluded with one more vague plan on how EFSF would be leveraged to support the trillions needed for EU banks/countries.  While politicians are making progress, market seems to be moving at lightening speed, with italian bond auction today producing yet another "higher than 7%" yield. This is the fourth such event within last 3 weeks. Market wants instant action, while politicians have the timeline of next year's elections on their mind.  There is a disconnect in timeframe of choice between these two groups, and the effects could show up in charts in the months ahead. Given the high correlation of global markets to the EU crisis, it is good to keep an eye on this chart. I have pulled up a macro view of Euro in the chart below.  Take a look at this weekly chart. It  reminds me of   ES daily chart from October to mid November, though not exactly  same formation of triangle that we saw in ES, couple of weeks back. 

Fundamentals are not pointing towards a prosperous EU  in 2012, but a recession and potential breakup of  EU are  being forwarned by policy makers.  So the speculative crowd has already  piled up on short euro, as central banks and other policy makers prepare  contingency  plans for the collapse of Euro.  Is this a repeat of 2008 but in another continent ?  In my assessment, all plans, currently under consideration, are simply a measure to buy more time for policy makers - perhaps another year, atmost. This would make sense, since policy makers around the world and central banks need some time to prepare for this global shock.  An uncontrolled  and sudden breakup of  EU would have global economic impact, and so world governments would be inclined to buy more time, and prepare for this event.   It seems only a question of time, and EU breakup seems the most logical solution, since no one can pamper the weak economies with freebie euros forever.  It will only drag france & germany, down the path that US is currently progressing in (viz. credit rating downgrade from AAA).

So, from a long term perspective, the speculative crowd definitely has the right argument, but timing this trade is the art.

Technical View:

The chart shows proper areas to initiate long/short  swing entries into euro. The red line has provided a safe area above which i will be looking for swing shorts. Alternatively, if one wants to attempt a contrarian trade with long euro, this triangle formation gives entries  below green support line (i like the shaded neckline support zone) with redline as the target zone.  But going long would be a high risk trade for the following reasons.

• From a technical perspective, when euro entered this shaded neckline zone, back in october 2008, a global crash followed.  This was again repeated in 2010 may, in both euro and global equities.  So, this could happen again in 2012 when we enter the shaded neckline area ?
• European credit markets are validating the fundamental views and future expectations.
• Last week euro tested the green support line and is currently bouncing back. How far this can bounce, depends on the measures taken by Dec 9th, EU leaders meeting.
• So, the only time to think about a long euro, as a contrarian trade, would be if  global leaders come up with a big bazooka to fire at the speculators, who have piled up on short euro trade. Given the unity we  see in washington and in G20 meetings, we can rest assured this is not going to happen soon. World leaders have a process that is very time consuming.  (Meanwhile, the bond vigilantes are targeting their bazookas at italy, spain and belgium, in the next round of fireworks.)
• So, the only reason i would be watching the  highlighted neckline support area is to alert me to a macro situation developing, for a potential crash in equities again (a repeat of  the magnitude of august 2011,  within this year, seems unlikely - i have come to expect these events  as once a year  routines :-)