Will the (bad) luck of the Irish drag down the euro - and stock markets?

Analysts are finding that the woes of the Irish banks and therefore the Irish economy and government are worse than previously believed. This appears to be affecting the euro, which brings back the potential scenario on our monthly chart of the euro potentially plumbing the level around 112 in the euro index $XEU). There are some I heard interviewed on NPR this evening saying a worst-case result might be some countries dropping out of sharing the euro currency. Who knows, if that happens then it could help the euro rebound later if not sooner; but for now the bleak news is corresponding with the euro looking like its recent 5-wave thrust up from a triangle - and subsequent drop - may be marking the conclusion of an "a-b-c" Fibonacci .618 retracement to the prior swing high leading to a bearish swing down (such as a third wave of a "C" wave down on the way to that 112). The daily chart of FXE (the euro ETF) also shows it entangled in moving-average resistance and indicators poised to roll over again. While it's theoretically possible for this currency to recover, it also wouldn't take much to knock it back down. It's in a little zone where it's going to break out, or break down. It might just go whichever way the Irish stock index does.

So look at the Irish Dow index ($IEDOW) chart below. It's hit price resistance with another upward test of a shallow price channel near the prior swing lows from the summer. Hmmm ... This index can be churning underneath moving average resistance and getting ready to roll down. So this one also, unless it manages a breakout above its price range resistance, may well break down in a bad way.

If bad luck of the Irish hurts the euro, will that help the dollar - and hurt US stock indices? It's fair to think that's how the consequences would play out. These are pieces of the bigger puzzle that traders need to keep an eye on. Our monthly chart of the dollar looks more like a triangle than a third wave up about to start; but once again, whichever exact pattern it chooses to trace, it's a picture showing that the dollar's reaction higher might climb higher still. If the U.S. dollar doesn't roll down to new lows, then dollar strength will be a headwind burdening the stock market's ability to advance.