The sharp and explosive move higher by the euro Wednesday may have some thinking the worst is over for Europe's common currency. But as it retraces its gains, one top technician's chart work suggests the euro is going significantly lower.
"Historically oversold conditions in the euro set the stage for an incendiary move [Wednesday]," said Evercore ISI's Rich Ross, who added that the euro could touch $1.12 in the coming weeks. "But ultimately the euro is going lower."
Using a weekly chart, Ross explained that euro broke a key technical pattern that could presage more pain. Specifically, he pointed to the fact that the euro has gone below the "neckline" of a long-term head and shoulders pattern. Technicians often look to this type of price action as confirmation to sell.
"Any way you cut it, this breakdown is bad," he said.