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Why the pros think the euro collapse will continue

Fear is taking its toll on the euro.

On Monday, the euro fell below $ 1.19 to a nine-year low. The concerns revolve around economic strength, monetary policy and even political stability. In terms of politics, upcoming elections in Greece have once again raised the specter of that country’s exiting the eurozone. On the economic side, even in European powerhouse Germany, the inflation rate in December was just 0.1 percent, the lowest in five years, as the continent faces economic stagnation.

But the biggest near-term catalyst could be monetary, as the European Central Bank is set to make its next policy announcement on Jan. 22. An attempt by the ECB to spur the troubled European economy could end up weakening the euro even more.

And according to one macroeconomic expert, the ECB inevitably will have to add euros into the market to jump-start the community’s economy when there is doubt some of the countries may stay in the currency union. That, in turn, may further lower the price of the euro versus the U.S. dollar.

The ECB “is going to have to ease,” said Gina Sanchez, founder of Chantico Global.  “And of course, you have all the uncertainty around Greece. While Greece itself is insignificant, it will make the euro a more risky currency.”

While Greece’s GDP of $ 242 billion is roughly the equivalent of Connecticut’s, Sanchez warns there could be ripple effects throughout Europe if it were to exit the eurozone.

“It will cast some question on other weak peripheral countries, like Portugal or Spain,” said Sanchez, a CNBC contributor. “Everybody will be looking at the next potential exit candidate, and that creates potential distress within the banking system because the banking system is still intertwined.”

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Meanwhile, the technicals have pointed to an inevitably weaker euro for nearly half a decade, according to the chart work of Steven Pytlar, chief equity strategist at Prime Executions.

“The carts are very, very negative for the euro, and they have been for the last several years,” he said. Pytlar’s chart shows the euro has made a bearish descending triangle that began to take shape at the start of the euro crisis of 2011.

“It has broken support, which is about the $ 1.20 level,” said Pytlar. “What this tells us is that demand for the euro is falling and that the fundamentals are continuing to deteriorate. Technically speaking, that would tell us to look for a further downside.”

But Pytlar warns not to use technicals independently of fundamentals. “There are a lot of macroeconomic events going on right now, and it might take until those flesh out before we see a bottom in the euro technically,” he said.

Thus, while one may project the euro reaching parity with the U.S. dollar using just the technicals, Pytlar urges some restraint.

“There is a lot more going on than just the chart when it comes to currencies,” he said. “Monetary policy can change things over night, so I don’t like to say, ‘The euro is going to parity with the U.S. dollar based on the chart….’ There is a case technically, but I wouldn’t bet on it.”

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