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Doubling Down on My Short Position in the Euro The hype surrounding QE3 has provided a tremendous opportunity to short the Euro. The argument for a higher Euro against the U.S. Dollar is that our printing presses will be running faster than theirs to bail out our respective economies. However, the Euro sovereigns bit off more than they could chew when they bailed out the banks, and now that the lifeguards are drowning, who is going to bail out the lifeguards? The only way out of this other than outright default and restructure of the Euro is through a massive devaluation of the Euro by the ECB to monetize the debts. While QE3 is certainly a potential game changer, I do not believe it will outpace the devaluation the Euro will need to endure to attempt to avoid outright defaults for Spain, Portugal, Greece, and eventually, Italy and France. These nations do not have a liquidity problem--they have a solvency problem and each of the nations mentioned above lack the ability, let alone the will, to reduce their debts to a sustainable level without monetizing their debts (i.e. printing more Euros to pay off current Euro debt service and obligations). The currency play is a relative one--how will one currency fair against another and I believe in the race to outright devaluation, the Euro will win in the short to medium term. Therefore, as the title suggests, I have been heavily increasing my short position over the last few days to take advantage of the spike in price of the Euro against the Dollar. 

Direct currency trading can involve a high amount of risk due to the level of leverage employed. Please do not invest accordingly unless you understand and are able to tolerate these risks.
Written By: Joshua Ungerecht

Currencies, Currency Trading, ECB, Euro, European Central Bank, Fed, France, Greece, Italy, Monetization of the Debt, Monetizing the Debt, Portugal, QE3, Quantitative Easing, Spain, US Dollar