Here is a chart of the Euro against the US dollar:

You can see the turnaround at the end of 2009 as the Euro crisis kicked off. The low point was a day when there were two stories on Bloomberg about how the EUR was going to go down forever. Since then there has been a rally (thanks to the bailout packages and the stress tests). 
I am wondering — a day too late, possibly, as the chart has started to fall again — whether the EUR has resumed its downward track. In addition to the cheerier mood, the EUR has recently rallied because short-term interest rates (as measured by the admittedly imperfect Euribor) have been rising in the Eurozone, a trend that has reversed, and because, according to Andrew Hunt, Eurozone banks have been reducing their holdings of foreign assets (and repatriating the proceeds). I persume the latter is related to the former and with the run-up in short-term rates apparently reversing it could be time to be short the EUR again. In the very short term, the past couple of days have seen the first press stories for a while about the deficiencies of the Eurozone stress tests and the ongoing problems of Greece, and German factory orders came in very weak this morning.
Why should the EUR be falling? The PIIGS are struggling with deflationary forces and their fiscal cuts will only make things worse on that score. At the same time, there is no sign of an inflationary boom in Germany, which would be needed to restore the PIIGS’ relative competitiveness without a bout of deflation. So either the EUR has to be weak to restore the PIIGS’ competitiveness vs. the rest of the world, or the PIIGS have to have a bad deflation — which would cause investors to flee the EUR and thus bring about a weakening of the currency.
So the short (comment and newsflow), medium (interest rates) and long-term (PIIGS deflation) influences on the EUR could all point downward at present. Perhaps it is a good time to go short.
Update: I have shorted EUR/USD with a stop above the recent trading range.
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