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How Low Can the Euro Go?

This is a big week for the euro, what with meetings on additional aid to Greece and an important regional election in Spain - not to mention the latest report saying the euro zone is in a recession.

"It just adds to this miasma surrounding Europe that keeps pressure on the euro and keeps things going down," says Andrew Busch, global currency and public policy strategist at BMO Capital Markets.

Trading patterns aren't helping the common currency either.

"People are building offers or short positions up towards 1.2800 the figure," says Amelia Bourdeau, director of foreign exchange at Westpac Institutional Bank. She told CNBC's Melissa Lee that investors for now seem happy to play the currency's trading range. "In order to catapult higher through those offers, you're going to need to see some pretty positive and substantial news come out," and she thinks that's unlikely for now.

Busch agrees, and he wants to sell the euro if it approaches the top end of its current trading range. He recommends selling the euro against the dollar at 1.2790 with a stop above that 1.2800 level, at 1.2810, and a target of 1.2640. "I want to continue to try to sell until I'm proven wrong."

Todd Gordon, co-head of research and trading at Aspen Trading Group, is wary of this plan. "I feel like the euro trade is overcrowded," he says, noting that euro-dollar did not break to a new low on Friday when S&P futures did. "That's a sign that FX might be telling the market something else." But that something might just be a bigger idea, Gordon says. He thinks there is an Elliott Wave pattern forming that could take the euro as high as 1.2850 before it resumes its downward trend, so he questions Busch's stop rather than the idea of selling the euro short.

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