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The problem is that the euro (and the other currencies against which it can move, like the Canadian or Australian dollars or the pound) is NOT the currency it needs to move against. And, strangely enough, it's not so much the renminbi either, but the other Asian currencies that are most out of whack - and oil.
But there are major political obstacles there - first and foremost within the Asian countries - to decouple their currencies from the dollar and/or to accept a realtive devaluation of the renminbi to their currencies.
Thus the adjustment downwards of the dollar comes against the euro, which only amplifies the imbalances - the Asians still continue their mercantilist policies, the US trade deficit does not improve, and Europe bears the pain.
(btw, the euro has increased in value by close to 60% against more of the currencies of the world in the past 5 years, and yet its exports are reaching record levels, so I am skeptical about claims of Europe's low productivity growth) In the long run, we're all dead. John Maynard Keynes
Absolutely correct you are about where the currency needs to move against, and how that will play out. Have some more oblique language about this already, not sure how to say it further without getting into Asian trade policy though, and then its another diary altogether.
Make sense? "C'est un scandale !"
