The Economic Numbers That Could Crush the Euro

It is difficult for someone to pay back a loan when they are not working. That applies to countries as well. Greece's industrial output fell 11% in April, according to The Telegraph. That follows an 8% drop in March (One can only guess what May's numbers will bring). The country's economy has been bogged down as increasing numbers of Greek citizens protest austerity measures designed to fix Greece's long-term fiscal outlook. As the rest of the European Union deliberates over a new bailout plan, investors should contemplate the affect Greece's declining economic performance will have on the euro. It appears as though the status quo simply cannot be maintained in the Mediterranean country—as Greek workers refuse to participate. If the new bailout plan is not generous enough, the citizens of Greece might simply not agree to go along. Eventually, the rest of the European Union—particularly Germany—might come to the conclusion that it is easier to simply cut Greece loose rather than continue to foot the bill. That may have a disastrous affect on the value of the euro. Action Items Bullish: Traders who believe that the new bailout package will calm Greek protestors and restore economic order might want to consider the following trades:

• WisdomTree Dreyfus Euro ETF EU is a long play on the euro. The euro may rally if the Greek debt crisis subsides.
• PowerShares DB US Dollar Bearish Index UDN is a short play on the U.S. dollar. European traders may have fled to the dollar looking for safety from the European crisis. If the crisis ends, traders may return to the euro.

Bearish: Traders who believe that the Greeks are demanding too much and an abandonment of the euro is the inevitable outcome may consider taking positions in the following:

• ProShares UltraShort Euro EUO is a short play on the euro. If Greece exits the euro zone, the euro may be in for a major bear-market.
• SPDR Gold Trust GLD is a long play on gold. If traders seek a safe-haven in gold, the etf may rally.

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