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Why the Euro's Prospects Look Like 2008

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Mike Kemp | Getty Images

he euro's prospects right now aren't bad, but the longer term outlook is a lot less rosy, this strategist says.

It's not so easy to figure out a trade on the euro just ahead of the meeting between France's Nicolas Sarkozy and Germany's Angela Merkel. There's less talk of a breakthrough than there was a few days ago, but Todd Gordon, co-head of research and trading at Aspen Trading Group, still thinks that "the path of least resistance is higher for the euro," especially since it broke through a key level against the dollar.

Longer term, though, it's a different - and darker - story, Gordon told CNBC's Melissa Lee. "The greater picture that we need to keep an eye on is how is this like 2008," he says.

Gordon points out that the European Central Bank was raising interest rates at the beginning of the credit crisis, "and then the market started hammering them because they had to come back and take that interest rate hike off because their sole mandate is to control inflation." The ECB raised rates again not long ago, and "I think that's going to have to come off," Gordon says.

In contrast, Gordon thinks the dollar is oversold. By his estimation, traders are already pricing in a third round of quantitative easing.

As a technical analyst, Gordon looks to charts for specific levels, and he thinks the euro could rise to roughly $1.51. But at that point, he would sell the euro against the dollar with a stop loss of $1.54 and a target of $1.42. As I said, scary.

You can watch the whole discussion right here.

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