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Where the Euro Is Headed in 2012

Friday, 30 Dec 2011 | 4:04 PM ET

The euro has been getting slammed, and this strategist sees the tough times continuing - but not for too long.

It's been a rough year-end for the euro, and Michael Woolfolk, senior currency strategist at Bank of New York Mellon, thinks more selling is ahead.

Woolfolk thinks that if the euro breaks through a technical support level at 1.2860, it could go to 1.2660. And while it has been hovering close to 1.30, "I think when trading starts back up on Tuesday morning, it could be another one of these targets that the market aims at and is quite likely to achieve," he says.

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Woolfolk believes the euro could hit 1.25 early in 2012, and there is even a 10 percent chance it could reach 1.20 as officials continue to struggle with the debt crisis and the structure of the monetary union.

After that, though, Woolfolk sees little downside.

"There are so many negatives that are holding back the U.S. dollar," he told CNBC, like rising inflation with near zero interest rates. So by midyear, he expects money to be flowing out of the dollar and reviving the single currency, bringing it to 1.40 - and possibly to 1.50 by the end of the year.

And you thought watching the ball drop would be exciting.

You can watch the whole discussion on the videotape.

Tune In: CNBC's "Money in Motion Currency Trading" airs on Fridays at 5:30pm and repeats on Saturdays at 7pm.

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