CurrencyShares Euro Trust (FXE)

ResearchLover (< 20) Submitted: 4/21/08 8:14 PM : Start Price: $158.08 FXE Score: -17.25

Argument 1.


1) When the euro reaches higher, dollar denominated stocks look cheap to european investors.


2) European investors buy dollar-denominated stocks.


3) Demand for dollars provides inverse price pressure.





As the US economy recovers, european smart money flows in to benefit from and fuel a positive pop.





Argument 2.


Will this be a significant enough part of the forces underlying USD/EUR trade? Probably not. But then, I would argue that investors can arbitrage moves between currencies and stocks in favored sectors that have fundamentally comparable stocks denominated in one or the other currency. They simply base a trade between the two on the most current relative trade volume between the European Union and the US. Clearly, this volume of international goods trade now favors demand for USD by europeans and not euros by the US.





Either way, I think there is a good chance that speculators can take a bite out of the currency divide and drive it towards parity. So that's up to a 60% move I'm predicting long term, and this argument only requires speculative greed.





Argument 3.


Speculators do not and will not dominate the majority of currency trade volume. Then, trade in goods, with a increase in US-made exports, and a decrease in european appliances, maybe european cars imported to the US, dominates the direction of the currency move.





Argument 4.


Oil and gold demand and purchases in the US determine the fall of the US dollar. I don't think that purchases of oil or gold will fall in the EU any more than they have and will here. And last time I checked, Norway wasn't planning on joining with their uniquely European oil supply.

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